Kentucky’s dependence on property taxes is unfair, burdensome. Here’s another idea. | Opinion
The concept of property ownership can feel undermined when homeowners are required to pay annual taxes on fully paid-off properties. I’m sure many Kentuckians have felt this way when the property tax bill arrives every year.
Property taxes play a critical role in funding essential services like schools, roads, and public safety. However, for many Kentuckians, the annual property tax bill raises questions of fairness, especially when it feels like paying rent on something you already own.
On average, property taxes fund 35 percent of the county tax revenue. However, unlike the state sales tax, which is 6 percent across every county, property taxes are decided by the local government based on their budgetary needs. For example, in Oldham County you can expect to pay on average $2,244 (.96% of the home value) a year compared to Wolfe County which pays around $293 (.54% of the home value). This heavy reliance can strain homeowners.
One potential solution is to diversify revenue sources by introducing local sales taxes. Unlike property taxes, which are tied exclusively to homeowners, local sales taxes would allow municipalities to generate revenue from all residents and even visitors, easing the pressure on property owners.
Unfortunately, this is not allowed in the state of Kentucky due to Section 181 of the Kentucky Constitution. Since its adoption in 1891 this has prevented local governments from levying any excise tax. Kentucky is one of eight states that do not give cities or counties the authority to levy their own sales tax. For the fiscal year of 2022 Kentucky collected $4.95 billion in sales tax revenue, but local governments are not allowed to create their own. By modernizing this outdated policy, Kentucky could give counties and cities the tools they need to create a more balanced and equitable funding structure.
There are concerns that this could have a negative effect on lower- and middle-class Kentuckians by raising prices or switching from one tax to eliminate another. A balanced approach based on local needs would have to be assessed. I am not saying property taxes should be eliminated but I believe the policy is outdated, with many Kentuckians speaking their frustrations. Lawmakers have listened to some with one proposal, Senate Bill 23 looking to freeze property tax values for those who own their home and are over the age of 65 or if they buy a home when they are 65 or after, whichever is later. However, I believe it should be once you own your home and/or you’re 65 the tax goes away.
It’s time for Kentucky to modernize its taxation policies and empower local governments to better serve their communities. Residents should voice their support for amending Section 181 of the Kentucky Constitution to allow local municipalities the flexibility to adopt diverse revenue sources, such as local sales taxes. Contact your state legislators and urge them to prioritize this issue, ensuring that local governments have the tools needed to create equitable and sustainable funding for essential services. Together, we can build a more responsive and fair taxation system that benefits all Kentuckians.
Tanner Willis is a native Kentuckian and a graduate of the United Nations Institute for Training and Research, where he obtained a master’s degree in international affairs and diplomacy. Currently, he is a manager at Inclined Advanced Analytics, based in Arlington, Virginia.