High tax rate stifling many Kentucky banks
Published 1:00 am Sunday, February 3, 2019
We are all bank customers. We make our banks the economic heartbeat of the communities they serve. It is every bank’s responsibility to know their customers, meet their customers’ needs, participate in local civic activities and assist with charitable causes. To do all that, banks in Kentucky must have the ability to thrive. But increasingly, our banks face an obstacle to that, and we have a stake in that problem.
Banks in Kentucky are hindered by an unfair tax structure. Banks are taxed, on average, 92 percent more than other corporations in Kentucky, regardless of how large or small those corporations are. Not only are banks taxed much more than other corporations, they have to pay taxes when they have little or no profit. Nowhere in America do businesses have such a financial burden; Kentucky’s taxes on banks are the highest in the nation.
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Paying 92 percent more than other corporations is bad enough, but you have to consider that 92 percent is just an average. Some banks pay much more. Some community banks are paying more than 1,000 percent more than corporations in Kentucky. That’s because the bank tax is based on capital rather than profit, and Kentucky has some of the best capitalized banks in the country. That has made our banks strong during difficult economic times, when other states’ banks have failed, but the tax makes our strength in capital become a weakness because more capital means more taxes.
So how does this affect bank customers? An unfair tax structure for Kentucky banks hurts our communities in ways that you may not realize. The tax burden restricts the good banks can do – investing in our communities, helping our communities grow through small business loans and home loans and contributing to civic and charitable causes.
Some of our communities still have banks lucky enough to succeed, even in light of taxes more than 92 percent of those imposed on other corporations. Many other banks have not been so lucky, and because of the burden of such an inequitable tax structure, they have not succeeded. Kentucky has lost 38 banks in the last five years. We stand to lose even more if the tax structure is not fixed. Local, vibrant banks are so important to vibrant, local communities. The future is in our hands. Banks should be allowed the same tax structure as other corporations in Kentucky, allowing us to take better care of our communities.
Dan M. Harbison
President and CEO
Farmers National Bank
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Bowling Green
J. Brent Bugg
President and CEO
Fredonia Valley Bank
Fredonia
Tony M. Salyer
President
American Bank & Trust
Bowling Green
Gary Broady
President and CEO
Franklin Bank & Trust Co.
Franklin
Tommy Ross
Chief Executive Officer
South Central Bank
Glasgow
Terry Bunnell
Chairman, president and CEO
The Peoples Bank
Marion/Glasgow
M. Todd Kanipe
President and CEO
Citizens First Bank
Bowling Green
Tom Jones
President, CEO and director
Morgantown Bank & Trust
Morgantown
Brian White
President and CEO
Auburn Banking Co.
Russellville