Ky. County Considers 8 Percent Insurance Premium Tax

In anticipation of revenue problems and in order to meet predicted budget shortfalls the Kenton County Commission in Northern Kentucky wants to levy a county-wide 8 percent insurance premium tax on homeowners and auto casualty insurance policies. If the proposal passes, a policy that costs $1,000 a year would pay an $80 county tax.

The Kenton County Mayors Group and the Fiscal Court have been working on the insurance tax premium proposal in what they describe as an effort to close perceived “funding inequities” between the county and nearby cities. City officials contend that their residents must pay both city and county taxes while a bulk of the services provided by those taxes, including police and road maintenance benefit only residents living outside the city.

“At this point, I’m inclined to vote for it,” Kenton County Commissioner Adam Koenig told the Kentucky Post. “We are having revenue problems, and this could help with that — I also think it would give us some equity in the way taxes are collected in the county.”

County officials say it’s the their responsibility to pay for police and roads in unincorporated areas and for county services such as the jail and public planning.

If Kenton County votes to collect an insurance premium tax, residents paying a similar city tax would receive a credit against the new county tax, according to state law. If a city resident, for instance, pays a 5 percent insurance premium tax and the county raises its tax to 8 percent, city residents have to pay a 3 percent insurance premium to the county. But if a city raises its tax to 8 percent, then city residents pay the entire 8 percent to the city and nothing to the county.

The rationale is that if city residents are going to pay an 8 percent premium tax anyway, that money should remain in the city where they live and would most directly benefit.

Kenton County would become the second Northern Kentucky County to implement an insurance premium tax. Campbell County last year doubled its insurance premiums from 5 percent to 10 percent in an effort to raise an additional $578,200 a year.