FRANKFORT, Ky. (WKYT) – Some big changes in Kentucky law mean people will pay more for many services starting January 1st.
- Changes to Kentucky’s sales tax take effect in January
- Changes coming to Lexington’s downtown station as new tax goes into effect
House Bill 8, which became law after the House overrode the governor’s veto, adds 35 different categories of services that are subject to the tax. sales and use of the state from the beginning of the year.
The new law, among many other changes, expands the basic sales and use tax to include the following services (provided the taxpayer makes more than $6,000 in 2021 or 2022):
- graphic design and graphics services
- commercial services
- telemarketing services
- polling and opinion research services
- lobbying services
- executive recruiting services
- website design and development services
- web hosting services
- facsimile transmission services
- private mail service
- guard service
- residential and non-residential security system monitoring services
- independent investigative services
- service processing service
- review of tangible personal property services
- private background check service
- station service
- roads and tours provided by car clubs
- time-share condominium exchange service
- venue rental for meetings, conventions, short-term commercial use, entertainment events, weddings, banquets, parties and other short-term social events
- social event planning and coordination services
- recreation, leisure and sports education services
- tuition and recreational camp tuition
- personal fitness training services
- massage, except when medically necessary
- cosmetic surgery services
- body modification service
- diagnostic services
- decoration and interior design services
- home moving services
- custom design services
- lapidary service
- labor and services to repair or maintain commercial refrigeration equipment and systems when no tangible personal property is sold in that transaction, including telephone calls and tolls.
- engaged in the repair or alteration of clothing, shoes, watches or jewelry when no tangible personal property is sold in that trade.
- pre-registered computer software access service.
The changes are part of a broader shift in strategy when it comes to taxes and government revenue. Earlier changes in 2018-19 added more services to sales and use tax. And HB 8 created a provision to gradually cut — and potentially reduce — state taxes. This resulted in a drop of 0.5% to 4.5% from January 1.
(Republican lawmakers have said they want to move forward by voting in the 2023 short session to cut the tax rate to 4% starting in January 2024, according to reports many.)
[More information via Kentucky Lantern: Republicans poised to cut Kentucky income tax again based on revenue boom that could be fleeting]
Many countries in recent years have moved away from income taxes to more consumption-based taxes. But generally across the country, income tax is responsible for about 40% of government revenue, while income tax accounts for less than 30%. trade, said Dr. David Agrawal, associate professor in the Martin School of Public Policy and Department of Politics. Economics at the University of Kentucky.
“We generally see that the government’s basic expansion efforts have not really kept up with the shift from goods to services,” said Dr. Agrawal. “These taxes are different, and they have different distributional effects. And these are the kinds of political and political decisions that in part economic literature can explain a little, but there are also prejudices of our citizens and politicians about their values. “
Financial analysis completed for HB 8 proposal:
- $530 million in 2022-23 tax revenue from tax changes
- 1,074 billion dollar decrease in revenue in FY 2023-24 from income tax
- $57.8 million in FY 2022-23 from sales and use tax expansion
- $149.7 million in FY 2023-24 from sales and use taxes.
This is estimated at 1.3965 billion dollars for two years.
Supporters have destroyed the current government surplus and believe that the change will make the state more competitive with its neighbors and more attractive to foreign companies and individuals to come here.
But the evidence in other states shows, says Dr. Agrawal, but these effects are usually minimal, and the theory of shifting from income tax to consumption tax does not fully apply in this case because part of Kentucky’s only consumption tax.
“There are so many unknowns. We’re not sure what it’s going to be like, you know?” says Kyra, a tattoo artist at To the Grave Tattoo Co. at Lexington’s Hamburg Pavilion.
Kyra’s industry is one of nearly thirty services that are subject to a 6% sales tax. (Body modification services subject to the tax include tattooing, piercing, marking, tagging, tongue piercing, transdermal and subdermal implants, ear piercing, dental implants and other modifications “not necessary for medical health” or teeth.”)
But Kyra and the other workers said WKYT’s Garrett Wymer but till the end of November they had not been informed that they would be subject to the tax, and thought that more should have been done to warn them of their obligations on the 1st of January.
They also worry that the additional fees imposed on benchmarks will cut into their businesses and the advice they rely on as employers.
“I know most of us here, we rely a lot on financial advice, just like other people like sharers and things like that,” Kyra said. “That’s how we get lunch and groceries, gas in the car every week. It’s a little scary.”
It’s also a bad time for businesses that already rely on spending their income. They are getting out of the epidemic – when business has slowed down and the cost of their equipment (such as gloves) has increased. Today’s rising costs of living and the economy in recession mean that many may not be rich enough for unnecessary things. Soon, consumers will have to add taxes on top of that, further limiting their spending.
“It stinks. It’s a bit worrying that there won’t be fewer customers from this,” Kyra said. “We also have to support our families, and around that, it’s not going to benefit anyone.”
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