LOUISVILLE, Ky. (WDRB) -- At his office in east Louisville, John DeWeese is frustrated.
Like many others, Mayor Greg Fischer's announcement last week took him by total surprise. Fischer proposed two options to solving Louisville's huge state pension obligations: slash city services severely or increase a city tax on DeWeese's lifeblood: insurance.
"My first reaction was this is outrageous," said DeWeese, an agent with Professional Insurance Agency, Inc. "This is a single-source solution to the pension problem.
"We're the messengers. We're going to be the ones that have to carry that message that, 'Hey, Mr. Consumer, Ms. Consumer, Mr. Business Owner, your total insurance cost is now, instead of going to be x, it's now going to be y. You didn't get any more coverage for it."
Soon after Fischer's request, Metro Council could pass the plan to increase the city's tax on home, life, marine and other insurance policies from 5 percent to 15 percent over the next four years. Auto insurance wouldn't be affected.
The Independent Insurance Agents of Kentucky, which represents DeWeese and 299 other insurance agencies statewide, penned Fischer a letter Monday asking him to amend the tax hike plan.
"Do not impose a tax on the insurance industry alone," President Tara Purvis wrote in the letter to Fischer. "Make it a fair tax and one that would be shared among all industries and residents."
In a bullet-point list, Purvis expressed "major concerns," including some of the following:
- The municipal premium tax makes Kentucky a less attractive place to do business, because it is unique to Kentucky
- Compared to other states, Kentucky is already high in premium due to taxes on insurance
- Responsible consumers are being penalized for purchasing insurance in the event of a loss/catastrophe
Jeff Klusmeier, another independent insurance agent, believes the impact would be wider than some would think.
"Eventually, you're going to see people start to skimp on coverage, and it's going to create more of a risk for everyone in Metro Louisville," he said.
Ultimately, Klusmeier feels like his industry and his clients are getting a raw deal.
"I thought it was fake news," Klusmeier said. "I was like there's no way the mayor is this brain-dead."
Over the weekend, he launched a Facebook page called "Ax the Insurance Tax," where he's hoping to rally other insurance agents, clients and others in contacting Metro Council to urge member to vote against the take hike.
Fischer has said other ways of raising revenue aren't as effective and can't be done in time. His office has said the average person's home insurance would increase by about $12 month if the tax hike is passed.
In a statement to WDRB, Fischer's Spokesperson Jean Porter said they appreciate the concerns raised by insurance agencies in the letter.
"As the Mayor has said, raising taxes is not a decision he takes lightly. Our city faces a significant, $65 million budget challenge over the next four years, driven largely by the increasing state pension obligation, and we have two options: devastating cuts or new revenue. Cities in Kentucky have limited options for raising new revenue; the insurance premium tax is the only one that can be increased in time to generate revenue to address the immediate FY20 budget deficit of $35 million," Porter said.
"It’s incorrect to suggest there will be no public input or vote; in fact, that is already underway, and we are encouraging people to share their views with Metro Council, which will vote on the proposal. It’s also incorrect to suggest Louisville is a “pace setter,” given that other cities, including Goose Creek, Shively, and West Buechel already have a higher rate. Our ability to recruit and retain businesses and talented professionals and maintain our city’s momentum is contingent upon us being able to provide city services, like public safety, paved roads, accessible sidewalks, great parks, libraries, as well as the quality of life investments our competitor cities are making. We cannot let this pension obligation from the state slow our momentum. Devastating cuts are NOT a path to prosperity – new revenue is a must."
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