New Taxes Go Beyond Cigarettes

Jul 2, 2018

Credit Wikimedia Commons

Starting this week, Kentucky’s 6 percent sales tax applies to a new set of services like automotive repairs, pet grooming and dry cleaning. The state legislature voted to make the tax increases to put more money towards public education and cut the state’s income tax for people and corporations.

Business affected by the tax hike say they’ve been unfairly targeted. 

Bill Rogers owns Parrot Cleaners, a dry cleaning shop in Louisville. A couple years ago he made a big investment…two massive machines that help his shop run faster and cleaner. 
“This is the highest tech stuff we got right now. We can produce roughly 150 pounds an hour.” 
He named the machines after his parents, Mary Ruth and Sonny. 
“They’re both gone and I wouldn’t be here if it wasn’t for them. When we talk about the equipment, at least they can say a name and I know exactly what they’re talking about.” 

Starting this week, Parrot Cleaners and other dry cleaners have to start collecting sales tax. They’ve never had to do that before. Rogers doesn’t think there’ll be a dramatic drop in people getting their clothes cleaned. 

“I think initially people might think about paying more for their dry cleaning, but like everything else after a while they’re just going to have to have it….You get stains on it you just gotta bring em on in and get them cleaned.” 
But he says the new tax will keep him and other cleaners from doing what he normally does—raising prices a tiny bit every year to account for inflation and help pay for investments like Mary Ruth and Sonny, the new machines. 
“Now we won’t do that increase on top of a six percent that the sales tax is going to be added on to it. That’d be like a 10 percent increase in a given year,” he said. 

Starting this month, Kentucky’s 6 percent sales tax applies to 17 new services where it didn’t get collected before. 
Those services include--extended warranty services, admission to bowling alleys, skating rinks and golf courses, tanning salons, janitorial services, pet care…there’s a bunch of them. 
A big change is labor on automotive repairs. 
“Paying it’s not the issue, it’s the misappropriation and can I say the idiots in Frankfort?” 
Michael Fautz owns Reece Service Center in Louisville. Like Rogers at Parrot Cleaners, he doesn’t think the tax increase will lead to a drop off in business. 
“I guess I’m lucky we’re in a neighborhood well off enough, or at least 90 percent of the people are well off enough to where they’re not going to care. I’ll raise labor price 6 percent and it’ll be a wash. People will complain but they’ll still pay it, ” he says.

But Fautz thinks it’s unfair that his is one of the industries singled out in the tax changes. 

“This the way they’re doing it now, just on labor on automotive just kinda feels like they’re just stickin’ it to one certain group.” 
Doug Peterson feels the same way. He’s a veterinarian at Frankfort Animal Clinic in the state capital. 
“Why weren’t the doctors, lawyers, accountants, engineers, architects, they are professional service providers just like veterinarians so why weren’t they taxed also?” 

Kentucky’s Republican-led legislature passed the surprise changes to the tax code late during this year’s legislative session, predicting that the increases would raise about $480 million in new revenue over the next two years. 
They also raised the cigarette tax by 50 cents per pack. 
The changes allowed lawmakers to reduce the state’s corporate and individual income tax rates, at the same time they eliminated several tax deductions like medical expenses, medical insurance and theft losses. 
Peterson says he understands the state is struggling financially and needs to bring in more money, but thinks that customers are going to blame businesses for higher prices. 

“I would say in most cases the tax is going to be passed into the consumer. Ultimately, unfortunately people are going to voice their displeasure more likely to us than the revenue cabinet.” 

Kentucky has had budget shortfalls in eight of the last 14 years. 

And that’s despite cascading cuts to public education and state colleges and universities over the last decade. 

Bill Rogers from Parrott Cleaners says he figured the tax increase would come eventually, he just doesn’t like the way it passed the legislature. 
“Kind of  added on a bill and within 48 hours we had this…they’ve talked about it the last 10 years and we’ve kinda dodged the bullet along with the lawyers and advertising people. Seems like the lawyers and advertising people continued to dodge it and we didn’t, ” he said. 

The new taxes went into effect on Sunday.