Payroll taxes account for 48.4 percent of the City of Georgetown’s general fund revenues over a 20-year period, according to a study conducted by the city on its finances past, present with projections for the future.
A glance at the payroll tax rate for cities within a 50-mile radius shows Georgetown’s residents pay more than other cities except Lexington residents. Georgetown’s residents pay up to 2.5 percent which is less than Lexington’s 2.75 percent but more than Richmond and Winchester at 2 percent each, Frankfort at 1.95 percent and Nicholasville at 1.5 percent.
But there is one major difference.
The City of Georgetown’s share of that 2.5 percent is 1 percent with the county collecting 1 percent. The school system’s .5 percent payroll tax is paid by those who live and work in Scott County. Georgetown residents who also work in Scott County pay a total of 2.5 percent combined payroll taxes to the city, county and school.
Lexington collects 2.25 of the 2.75 percent. The other cities mentioned do not share its payroll tax collections.
Georgetown’s 1 percent amounts to about $12.6 million in current revenues, the report states.
The city’s report uses 18 other “peer cities” as a barometer and concludes the average payroll tax rate among those peer cities is 1.72 percent.
“If Georgetown’s payroll tax was at the average, it would receive $21.7 million, or $9.1 million more per year in payroll revenues,” the report states.
Scott County passed its first payroll tax in the 1980s after Toyota Motor Manufacturing Kentucky plant was annexed into Georgetown.
The last segment of the county’s payroll tax was passed as Scott County approached the 30,000 population threshold. Under state law at the time, city residents in a county with a population greater than 30,000 could receive a credit against county payroll taxes. Scott County was among a half dozen counties facing a similar loss of revenue, so legislators led by then state Rep. Charlie Hoffman passed a bill that grandfathered Scott County in and allowed the county to continue to collect the tax.
The report also compared the average payroll revenue per capita among the peer cities. Georgetown’s payroll per capita is $375, which generates the $12.6 million. The average payroll per revenue capita among the peer cities is $450 with Frankfort leading with $665. Payroll revenue per capita among other cities of interest include: Richmond at $393, Nicholasville at $231 and Winchester at $493. It should be noted, the state incentive for Toyota to improve its plant reduces the city’s payroll tax per capita by an average of $74. With the incentive added back, Georgetown’s payroll tax per capita would be $449. The Toyota incentive ends March 2027.
Mike Scogin can be reached at email@example.com.