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City of Liberty considers 1 percent occupation tax

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By Charlie VanLeuven

The Liberty City Council approved the first reading of an ordinance which would create a 1 percent tax on payroll for almost everyone working in city limits, and would also require business licenses. According to the draft ordinance, it would be effective Jan. 1, 2018.

At a Nov. 22 meeting, the vote was 4-1 in favor of the new ordinance, with Councilwoman Carla Turner opposing. The council will have a second reading at its next council meeting.

According to Councilman Nick Scott, the tax is necessary to increase the city’s tax revenue. Councilman Andy Lawhorn said that if the new tax were approved, he would want another tax to be phased out.

“If this goes, I would like to see another taxing district go off,” he said.

No estimate of how much the tax could raise was available. 

Turner did not state her specific reason for opposing. She said that her only concern was that people might not understand how much money that means for their paychecks, especially those making minimum wage. However, she said that the tax would allow the city to fund projects that would help the city grow.

“I’m sure we’re going to have to do something,” she said.

Mayor Steven Brown estimated that a person making minimum wage would pay approximately $2.90 from each paycheck, or around $150 per year. He explained that the city’s auditor suggested the payroll tax, which 109 of 120 counties in Kentucky use.

“Instead of raising property taxes, that is usually the alternative,” he said.

The closest city not using a payroll tax is Lawrenceburg. He added that Greensburg is seeking to raise their tax to 1.5 percent.

“They have so much trouble funding all the things they want to do,” Brown said.

He added that if pension reform passes, the City of Liberty would have to find $70,000 per year to pay for public workers’ retirement. He said the 1 percent tax could help fund that.

Brown said that there were a significant number of people working in the city limits, including many high wage-earners, that don’t actually live in the city. 

He said that public sector employees, like city workers and Casey School district workers who work in city limits, would also pay the tax. However, according to the draft ordinance, public safety officials “including all law enforcement, fire department, and EMS/EMT personnel working for a governmental (public) agency are hereby exempt from the occupational/payroll tax.”

The funds would not be dedicated to any project or department, but would go into the city’s general fund, like property taxes. The council would then spend the money on whatever they deem necessary.

Josh Switzer, Executive Director of the Economic Development Authority of Liberty-Casey County, said that it would go towards better services, infrastructure and downtown redevelopment.

The way it would work is that all businesses operating in the City of Liberty, either permanently or temporarily, would have to obtain a business license or permit. The discussed price would be $25 for a business license.

At that time, the city would seek information including the number of employees and payroll information, in order to assess the tax. According to the draft ordinance, the city will have the right to audit private businesses to ensure compliance with the new tax.

Businesses will also be required to submit quarterly reports demonstrating compliance with the tax, including a W-2 and W-3 at the last quarter in December.

According to the draft ordinance, the payroll tax information would be kept confidential and exempt from Kentucky public records.

Those businesses found not to be in compliance will be subject to penalties, including fines over $25, and up to 25 percent of the total taxes owed in penalties. Businesses not complying are guilty of a Class A misdemeanor, and could have their business license revoked, a stop work order, and a disconnection of all city utilities.

Councilman Doug Johnson moved to approve the first reading of the ordinance. Lawhorn seconded, and the vote was 4-1, with Councilman Brian Beeler absent.

See attached a link to download a copy of the proposed new occupation tax in the City of Liberty.

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liberty_occupationtax.pdf1.29 MB