Commonwealth Journal

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October 17, 2013

On July 1, 2014, Somerset will take 60% of payroll tax collected in city

Somerset —

The shoe is finally going to drop.
Somerset, after years of using the threat of enacting a city occupational tax as a negotiating hammer, is now driving a wedge that likely will widen the traditional split between city and county governments:
• Somerset, already one of the most financially solvent municipalities in the state, maybe even the nation, is about to become richer.
• Pulaski County, a bright spot in traditionally poor Appalachia, is about to become poorer.
Since January 1, 1987, when the county’s 1-percent occupational and net profit tax levies were put in place, some Somerset city officials have salivated about the pot of gold that transformed Pulaski County government from poverty to affluency. Now, a Somerset ordinance, effective January 1, 2014, levies a 6/10 of a percent occupational and net profit taxes on workers and businesses within the corporate limits.
Six-tenths of a percent sounds minuscule, but when multiplied by dollars, as in who gets what in tax dollars, it is imposing; even crippling to county government that will end up with only 4/10 of a percent of occupational and net profit taxes generated inside the city. The city ordinance does not affect occupational and net profit taxes collected outside Somerset.
When Somerset starts collecting occupational and net profit taxes, the city will get 60 percent of tax revenues from businesses and workers in the city. County government will get 40 percent. Since a large majority of businesses and employees’ paychecks are within Somerset’s corporate limits, city government will take a big bite out of the approximately $10 million a year that now goes to county government. 
The city has delayed collection of the occupational tax until July 1, 2014 and the net profit tax on businesses until April 15, 2015. Somerset city attorney Carrie Wiese explains that under existing state law, county government is not required to credit city taxpayers with occupational and net profit taxes they pay. 

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