60 Percent Insurance Premium Tax Increase Proposed In Henderson, Ky.

A 60 percent increase in the Henderson, Ky. Insurance premium tax has been proposed by Henderson City Commissioner Robby Mills as an alternative to a payroll tax.

Mills told the Evansville, Ind. Courier-Press he is favoring an insurance tax increase over a payroll tax for the following reasons:

* The insurance tax is already in place. It is a proven revenue source (for) which we can accurately predict its return. The payroll tax is a new tax that will require the development of a new collection mechanism, and the revenue it will generate is unknown.” City staff is estimating the payroll tax would generate $3.5 million to $4 million annually.

* The insurance tax requires contributions from every resident who owns an auto or real property. This spreads the tax burden across more individuals.”

* The insurance tax “does not unfairly tax” people who live outside the city limits.

* Insurance tax revenues will grow as time passes. “Insurance tax premiums have been proven to grow near the rate of inflation. With the added rate increase, this will put the city’s revenues in a better position to keep up with inflation and the rising costs of doing business.”

“As a fiscal conservative, the idea of implementing a new tax has been very troubling to me,” Mills said in a letter to fellow commissioners. “Up to this point, I truly believed the payroll tax option was the only option available to us to balance the budget.”

Mills told the Courier-Press he had operated under the misapprehension that the city’s 10-percent insurance tax was at its maximum level.

But that’s not the case. At least five Kentucky cities have insurance tax rates higher than 10 percent. They are Ravenna at 15 percent, Uniontown and Junction City at 12 percent, and Radcliffe and Dayton at 11 percent.

At 16 percent–the level Mills is proposing–Henderson would have the highest insurance tax rate in the state. Mills said he arrived at that figure calculating that each percentage point the insurance tax goes up would generate an additional $480,000.