Chambers oppose Corbin’s stacked payroll tax

The city of Corbin voted earlier this month to “stack” an additional one percent tax on the gross wages of workers in the Knox County portion of the city, but the move has drawn opposition from two of the area’s largest business advocacy groups.

The Southern Kentucky Chamber of Commerce Board of Directors voted unanimously last Thursday to oppose the measure during its regular monthly meeting. Subsequently, the Knox County Chamber of Commerce board of directors held a similar vote to oppose the move.

In a letter to Corbin City Manager Marlon Sams, and members of the city’s five-member Board of Commissioners, the Southern Kentucky Chamber board noted that the city had been “forced into” a “difficult legislative and legal position” regarding collection of occupational taxes, but said the “increased tax burden on employees” was unfair.

“The decision to enforce a full 1 percent tax on workers in Knox County we feel is ill timed and unfair,” the letter states.

“Businesses don’t just take into consideration the taxes on their net profits, but also the tax burden of their workers when deciding to locate to a community, expand and hire additional workers, or perhaps relocate somewhere else. There are several companies looking at the Knox County side of Corbin as a potential home. We fear this move could endanger those plans and cost our community jobs.”

About 23 percent of Corbin’s population resides in the Knox County portion of Corbin.

Businesses and workers pay a one percent occupational tax on the Whitley County side of Corbin, but workers will pay two percent on their gross wages in the Knox County part of the city because the city’s tax will “stack” on top of a competing one percent tax imposed by the Knox County Fiscal Court. The city has a tax-sharing agreement with Whitley County that avoids a similar situation.

In its letter, chamber leaders pointed out several alternatives as possible sources of additional revenue.

Current law, which goes into effect July 1, would allow taxpayers to claim a .1 percent credit or offset against the Knox County occupational tax this upcoming fiscal year, and a .2 percent offset the next.

Corbin could have made its tax rate equal to the offsets provided thereby avoiding a stacked tax. The option was available in 2014 as well, but the city decided not to pursue the extra tax revenue.

Leaders have estimated that Knox County is getting anywhere from $800,000 to $1.2 million off it’s one percent tax out of the city of Corbin.

The letter also notes that spending in the city’s “long-standing” departments has increased nearly $2 million in less than a decade, and calls for spending reductions.

The chamber board said it would not oppose a more modest tax increase if absolutely necessary.

Lastly, the board said it would favor looking at existing fees as a “possible way to garner more revenue.”
Corbin leaders did not comment on the chamber’s move at City Commission’s monthly meeting Monday.

The letter was signed by 10 of the chamber board’s 11 members.

Corbin passed a citywide occupational tax ordinance in 2005. Through an agreement with the Whitley County Fiscal Court, the city keeps 75 percent of revenue garnered from the tax in the Whitley County side of Corbin. But city leaders have never been able to reach a similar agreement with Knox County leaders, and so never collected the tax.

Knox County passed its tax in 1999 and has a revenue sharing agreement with the city of Barbourville. Corbin filed a lawsuit in 2008 to settle a dispute over the issue. Corbin has long claimed city residents can claim a credit against the county tax, so that it would not “stack,” — forcing Corbin residents and businesses in Knox County to pay two percent instead of just one percent.

Corbin won a series of legal decisions and was on the verge of collecting its portion of the tax when State Senate President Robert Stivers (R-Manchester) first intervened in 2012 to block the move by adding language to a “tax amnesty” bill that essentially changed the rules on occupational tax collection. He renewed the language in 2014 and again this year, but both times added phased in credits for city taxpayers that they could claim against the county tax.

Corbin has fought these “Stivers’ Amendments” as illegal special legislation, but lost a court challenge over the issue.