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MURRAY – Ahead of a county vote to pass a 7% auto insurance premium tax, local insurance agents are asking magistrates to spend more time researching possible impacts or reduce the proposed percentage before making a final decision.
The Calloway County Fiscal Court will meet at 9 a.m. Tuesday in the Courthouse Annex, and members are expected to vote on the second reading of a tax that would implement a 7% tax on insurance policies for personal automobiles. If it passes, the tax would take effect July 1. In last month’s Fiscal Court meeting, Judge-Executive Kenny Imes said the county road department’s $4 million annual is simply not enough to resurface roads and repair a number of bridges that are in desperate need of improvements.
Imes said the City of Murray currently taxes auto insurance policies at a 7.25% rate, and city residents would not pay any more under the proposed ordinance because the tax would be a quarter-percentage point below the city’s rate. The ordinance would exempt insurance on vehicles owned by schools, churches, city and county government and nonprofit 501(c)(3) organizations. A public hearing will be held before Tuesday’s vote.
Jason Billington, an owner/agent at Murray Insurance Agency, said he and other agents with whom he has discussed the issue understand the county needs new revenues, but they don’t believe the ordinance as written is the right move.
“We all know the county needs money,” Billington said. “I mean, it doesn’t take a rocket scientist to know that, whether it’s for roads or bridges or whatever they’re trying to do. With inflation, it obviously puts a whole different spin on everything because everything’s more expensive. (That’s the case) for everybody, not only the county but for the taxpayers. But we want to do what’s fair.”
Billington said a local government premium tax (LGPT) is one of only three options – the others being a payroll tax or a property tax increase – the county has for generating revenue, so county elected officials are admittedly in a tight spot. With property taxes, though, the county can only take in 4% more revenue than the year before without the measure being subject to a referendum.
“With an LGPT, they don’t even have to have a referendum to vote that in,” Billington said. “They can just decide to do it at whatever amount they want to do it.”
Billington said calling it a 7% tax is misleading because insurance companies are most likely going to collect an additional 1.05% on top of the 7% “to offset the costs for collecting the money and sending it to the municipality.” He said the tax would disproportionately affect farmers, long-haul truckers and any other business with a fleet. He said he is also concerned that not enough of the public is aware that they might be facing this new tax in the next few months and will probably notice the tax for the first time when they pay their insurance premium.
“I’ve called farmers, I’ve called truckers and they didn’t know,” Billington said. “I mean, the reality of it is that the Ledger & Times put it out there and I know (District 4 Magistrate) Paul Rister has put some posts online. I’m not trying to get onto the county because I don’t think they’re trying to be elusive or non-transparent. That’s not the situation. My biggest concern is how much planning was done and how much do people know about it?”
Billington said that while he would prefer no tax at all, if the county is going to pass it, he would prefer it to start a few percentage points lower to see if the tax might raise enough revenue at that rate before magistrates considered going all the way to 7%. He added that he thought before drafting the ordinance, the county should have enlisted the help of some local experts to figure out what the possible impacts of the tax might be.
“If you’re going to impose a tax, don’t you think you should do some study to see how much that’s going to bring in other than ‘We want to try to bring in the maximum amount we can’?” he said. “Aren’t you going to study the economic impact of that? We’ve got a resource here that most counties don’t have. We’ve got Murray State, and we have a master’s program in economic development there that trains economic development professionals.”
Ryan Walker, a State Farm Insurance agent in Murray, said he and Billington met with several other agents to discuss their thoughts on the tax because they all wanted to look out for the best interest of their clients.
“I wouldn’t say that I’m necessarily against an insurance tax; I just want to make sure that they’ve looked at all the options and that that their math is correct (on how much revenue might be generated),” Walker said. “I do appreciate that they’re only taxing auto and not homeowners or farms. That to me is a sign that they are trying their best and not being greedy about it. I think they’re doing everything they can to have as little impact on the community as possible while also fulfilling their needs from a budget standpoint. … I understand they have a legitimate need for more revenue, but I just want to make sure that their math is correct and that they’re not going to end up getting a lot more than what they end up needing.”
Imes said he is not happy the county is having to adopt more ways to generate revenue, but he said the tax is necessary to maintain the county’s roads and bridges. He said he expects the Fiscal Court will pass the second reading on Tuesday, but the county won’t really know how much revenue the tax will generate until after the first year of collection.
“We’ve gotten numbers that say we’re going to generate around $800,000 and we’ve got numbers that say we’re going to generate $1.8 million,” Imes said. “We’ve talked to the insurance commissioner, and (the commissioner said) until the different insurance companies actually run it through their computer systems and figure it out, we won’t know exactly how much income the county would get off of it. I just want to assure everybody it will all be designated for roads and bridges, without any cuts in our current program. This is just something on top of it so we can get more roads resurfaced and bridges fixed.”
While local insurance agents would like to see the county pump the brakes on voting on an insurance premium tax, Imes said the county cannot delay if it intends to collect the tax this year.
“There’s a very definitive reason (it must be done now),” Imes said. “We’ve got to have this in by April 1 to the Department of Local Government, or we wait another year. We’ve been discussing this for a year and trying to figure out the best, least painful way to do this for the residents of Calloway County, and this was just the best we could come up with. We looked at payroll tax, we’ve looked at an insurance tax at a lower rate that covers everything like the city’s does, but this is just our best shot. We’ve done our due diligence and tried to figure out (what to do) as best we can, but I don’t think anybody would question the need for better roads. They might question what manner we’re going to try to do that – people aren’t opposed to better roads, they’re just opposed to more tax.”
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