Modernizing the Restaurant Tax Spurs Growth for Cities

By Mayor Les Stapleton - and the Kentucky League of Cities Board of Directors

A bill to modernize Kentucky’s outdated restaurant tax is moving through the General Assembly. Senate Bill 166 provides an opportunity to create jobs and invest in our communities. It changes the old formula for the new economic realities our cities are facing. SB 166 eliminates the gross receipts or net profits tax that restaurant owners currently pay to the local jurisdiction with a restaurant tax and replaces it with a tax on restaurant purchases of no greater than three percent of the bill. This new approach promotes economic growth and jobs in several ways, including eliminating the tax on restaurants so there is more money for the owners to hire and expand. By expanding the definition of what a city can do with the new tax, investments in actual infrastructure can occur to enhance tourism, recreation and economic development in our communities.

The bill rebalances the outdated formula previously in use, which directed all of the money generated to nonelected tourist commissions for marketing activities. The new formula provides no more than 75 percent to cities to build, operate and maintain infrastructure related to tourism, recreation and economic development. At least 25 percent is still reserved for a tourism commission’s marketing efforts.

The world has changed. People no longer use brochure racks and billboards to plan where they visit, eat or spend their dollars. Today, people rely on their smart phones and independent review sites like Yelp and Trip Advisor. Cities that invest and make improvements that offer visitors a welcoming experience are rewarded with strong positive reviews and increased popularity. This leads to increased revenues, more jobs and a more robust local economy.

Kentucky is geographically blessed to be in the center of the country and within an easy day’s drive of nearly 70 percent of the nation’s population. With every passing car on its way north, south, east or west, we are losing revenue. With all the money cities currently spend from their general funds on festivals, recreation and infrastructure, we are missing out on an opportunity to collect revenue and reinvest in our own communities. We are striving to be 21st-century cities with a 20th-century funding model. We are striving to be cities of tomorrow with a revenue mode based on yesteryear.

This bill is a tremendous opportunity for us to modernize and move forward. Rather than spend these funds on pamphlet racks and billboards, let’s build something we can be proud of and create opportunities, jobs and more vibrant cities for everyone.

By Mayor Les Stapleton

and the Kentucky League of Cities Board of Directors

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