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Kentucky speaker: Local option sales tax is focus

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FRANKFORT, Ky. (AP) — House Democrats' top priority in January could be allowing local governments to temporarily raise taxes to help pay for construction projects, House Speaker Greg Stumbo said Wednesday.

Stumbo had previously said that House Bill 1 - the spot reserve for the House majority's top priority - would be a bill to legalize casino style gambling in Kentucky, an issue pushed by the state's formidable horse racing industry and its popular Democratic governor.

But that changed when Churchill Downs, Louisville's iconic horse racing track, donated money to a political action committee dedicated to electing Republicans to the state legislature. Democrats have an eight-seat majority in the House, one of the last Democratically-controlled state legislative bodies in the South.

"We're going to have to go back to square one on (gambling)," Stumbo said. "I'm not going to say it can't be done, but there are some wounds that need to be healed."

Stumbo has already flip-flopped on the tax, opposing it early in the 2014 legislative session before changing his mind near the end. Republicans, who are trying to win control of the House for the first time since 1920, seized on that fact Wednesday.

"Last month the Speaker said HB 1 next year would be expanded gaming. This month it is local option sales tax. Maybe the real HB 1 should be to increase the number of months in a year so he can try and keep the numerous commitments he has made to various groups," House Majority Floor Leader Jeff Hoover said in a news release.

For the sales tax to become law, Kentucky voters would have to approve an amendment to the state constitution - which Stumbo cited Wednesday in defending his record on the tax.

"Regardless of how I may feel about it personally, when the mayors of our largest cities and community business leaders of our largest cities think it is something that ought to be done, who am I to stand in the way of putting it on the ballot and letting the people of Kentucky decide?" Stumbo said.

The local option sales tax would let local governments impose an extra 1 percent sales tax to raise money for big construction projects. Voters would have to approve the tax first. Local leaders could only use the tax for specific projects and the tax would expire once the project is completed, according to a proposal the state legislature considered earlier this year but did not pass.

State and local officials who support the bill see it as a way for local governments to pay for expensive construction projects themselves instead of having to rely on dwindling state resources. Kentucky's state budget ended the 2014 fiscal year with a $90 million shortfall.

But many of the state's small businesses oppose the tax. Kentucky already charges a 6 percent sales tax, which retailers have to collect. They say allowing local governments to raise the tax would raise their prices and hurt their profits.

Louisville Mayor Greg Fischer dismissed those arguments, adding Kentucky's sales tax is less than neighboring states. He wants to use the tax to pay or things like public transportation, roads and finishing the Louisville Loop - a 100 mile trail system that encircles the city linking parks and neighborhoods.

"This type of investment is what helps communities grow," Fischer said. "As communities grow, that's the best way for retailers or banks or any service provider to grow."

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