Kentucky Mayor Pushes for State Luxury Tax to Aid Pension Problems

Officials hope reform is adopted before next fiscal year begins.

To help increase funding for Kentucky’s pension predicament, Louisville Mayor Greg Fischer suggested last week that lawmakers tax luxury items, warning that huge pension payments could lead to large city budget cuts in 2018.

“We’re always ready to deal with the unexpected, but this will be difficult for the people of Louisville and force metro government to reduce consistent services,” he told the Courier Journal.

During his annual State of the City Address, Fischer made his proposal and also touched on various issues from investments to creating opportunities for the community.

According to The Journal, Fischer’s officials told Metro Council last month that the city would have to spend $115 million on pensions—$38 million more than this fiscal year—if no drastic changes to the retirement system were made. , The Journal reports that this is the biggest one-year surge metro government has faced.

City officials say that Louisville is projecting $20 million to $25 million more in budget revenue growth compared to 2016.  Fischer urged lawmakers to combine pension reform with tax code changes during the 2018 legislative session, which is now underway.

“Kentucky’s communities have critical needs in terms of education, health, social services, and infrastructure, [and] to meet them, Frankfort must broaden the tax base,” Fischer said. “We need to take a hard look at a tax code that exempts luxury items. It doesn’t make any sense to consider cuts that can hurt a child’s classroom, law enforcement, drug treatment, or our justice system when we don’t tax country club members and limousine rides—that’s just not right.”

The Journal notes that depending on whether a pension reform is adopted before the start of the next fiscal year, Louisville pension payment amounts could change, with city officials optimistic on paying off the obligation in phases if the $38 million sum remains.

When asked if local taxes could be increased should the state legislature not come to a reform, Fischer said that his administration is reviewing its budget, but is also watching to see what happens at the state level.

“We don’t look at taxes until the very last option, (and) the council would have to agree with that as well,” he said.

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