Bill filed to centralize local tax collection. Is it red tape reduction or ‘government overreach’?
A bill proposed in the Kentucky legislature would move Kentucky towards a centralized, state-level system for local governments collecting taxes.
House Bill 263, filed Tuesday by Rep. Jared Bauman, R-Louisville, proposes creating a single online portal for the collection of occupational taxes, which comprise a major source of revenue for Kentucky cities and counties.
In Lexington, occupational taxes — also known as payroll or withholding taxes — make up about 55% of the Lexington-Fayette Urban County Government’s General Fund revenue.
The bill would establish a working group to assist the state treasurer’s office in creating a portal for companies to pay these taxes, as opposed to companies paying them in-person or via mail to various local government offices across Kentucky’s 120 counties and more than 400 cities. The bill requires the creation of the portal by Jan. 1, 2028.
“HB 253 simplifies the tax payment process by creating a single online portal, reducing administrative burdens for businesses of all sizes,” Bauman said in a press release for the bill. “By streamlining compliance, the measure not only supports small businesses but also fosters economic development, making it easier for entrepreneurs to focus on growth rather than red tape.”
Not everyone is thrilled. One man’s red tape reduction is another man’s big government initiative.
J.D. Chaney, executive director and CEO for the Kentucky League of Cities, said that his organization straightforwardly opposes the bill. He framed it as “government overreach.”
“This bill is added governmental bureaucracy and will only complicate the process of collecting occupational taxes, a vital revenue source for cities that funds critical infrastructure as well as emergency services, like police and firefighters,” Chaney said.
“Cities are the economic engine of Kentucky, and we will do everything we can to protect that engine from unintended consequences of government overreach and expenses, which this bill would create.”
The fate of the bill is uncertain.
House Speaker David Osborne, R-Prospect, did not signal Tuesday whether or not the bill had the support of the GOP’s 80-member caucus. He did say that discussions on the issue have taken place and will continue to take place.
“It’s a tough issue to reach consensus on,” Osborne said. “We are having, and we will continue to have, conversations within the caucus about the issue. A lot of local governments are very reluctant to get behind that, but at the same time, if tax collection has gotten to be onerous on businesses, then that’s not good business either.”
Senate President Robert Stivers, R-Manchester, expressed a similar sympathy with business people frustrated by having to file taxes to dozens of municipalities — he used the example of there being 27 cities in the three main Northern Kentucky counties — but didn’t commit one way or the other on the bill. He said he’s met with the Kentucky League of Cities on the proposal, who brought up concerns around cities being able to make sure they weren’t shorted via the collections system.
Joining Chaney in opposition to the bill is Jim Henderson, executive director of the Kentucky Association of Counties (KACo). He called the proposal “costly, unproven, and potentially duplicative.”
“Counties believe the most efficient form of government is local government. County officials are best positioned to understand and meet the needs of their own taxpayers,” Henderson wrote.
This story was originally published February 5, 2025 at 5:00 AM.
