The Louisville retirement-related budget deficit led Mayor Greg Fischer to request an increase in the tax on insurance premiums, a little-noticed tax often included in policyholder payments.
His proposal, unveiled Wednesday, would avoid the painful budget cuts announced by his government last week.
"We must fight for the future of our city and invest in the future of our city," said Fischer.
Here is some information to know about his proposal and what it could mean for you:
Who will touch the tax increase?
The tax on insurance premiums is one of the few taxes that the state allows local governments to levy.
The tax is the responsibility of the insurance companies, but it is usually the companies that pass on the cost to their customers, who are probably the ones who would absorb any increase or change in the rate.
"In the end, it's like any tax: with the tax on gasoline, oil companies are not paying for it," said David Cronin, owner of Louisville Kentucky Insurance. "It's more money coming out of the pocket of the average person" in the form of insurance premiums.
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What types of insurance would be taxed?
The proposed tax increase would be levied on the premiums you pay on home, marine and life insurance, but not on your vehicle insurance.
According to Fischer's plan, taxes on insurance premiums would increase from 5% to 12.5% in the next budget, then increase to 13.5% in fiscal year 2022 and 15% in the course of the year. year 2023.
What could it cost me?
The proposal would increase the average homeowner's insurance in Louisville from $ 12 to $ 13 a month, according to a report from the mayor's office.
The mayor's office has not given any estimate of the change in the cost of marine insurance premiums or life insurance, but this probably depends on the individual policy. But all you pay in taxes on your premiums will triple by the year 2023.
If I live in a suburban city, am I touched?
If you live in a suburban town in Jefferson County, you may be. These cities plan to increase their insurance tax rates, if Metro's City Council approves the Louisville increase. Rates vary in suburban towns and reach 10% in Shively, Goose Creek and West Buechel.
What does the rest of the state do?
According to the state's insurance department, the average tax on insurance premiums hovers around 7.3% depending on the types of insurance.
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How much money would it hoard?
Louisville's insurance premium tax currently accounts for about $ 63.6 million a year, or 10 percent of the general fund's revenue, according to the mayor's office.
The increase would bring an additional $ 37 million for the next budget, Fischer's office projects.
As the total increase to 15% is gradually introduced, this increase varies from one year to the next. City officials estimate that by 2023, the increase in revenues would rise to $ 63 million, double the current revenue.
This would help close a projected $ 65 million over four years deficit related to the increase in pension obligations.
If the city wishes to change the rate of its insurance premium, it must notify the state 100 days before July 1, the beginning of the fiscal year. This means that an order modifying the rate will have to be approved by the Metro Council before the end of March.
Darcy Costello: 502-582-4834; email@example.com; Twitter: @dctello. Support local journalism by subscribing today: www.courier-journal.com/darcyc.