Kids Zone > Taxes and Fees

Kentucky cities collect over $1.6 billion each year in taxes to pay for a number of city services, such as police, fire, streets, sidewalks, parks, and more. Here is how cities can get tax revenue:

Property Taxes

The Kentucky Constitution requires cities to tax property. The property tax applies to your home (real estate) and some of the big personal items your family may own, such as a car (personal or motor vehicle). Property taxes are based on the value - how much something is worth - and requires regular assessments to determine the value. Cities aren't the only level of government that have property taxes; property owners also have to pay property taxes to the state, their public school district, their county, special districts and special-purpose assessments, if any. Property taxes are usually paid once a year.

Business Taxes

Cities can levy taxes on most businesses in the city. The bigger cities can have a tax on payroll, which is a tax that workers pay out of their paychecks. For instance, a worker might pay one or two percent of their pay to the city government. This is a tax on earnings - what someone makes at a job - instead of a tax on income - how much money someone gets in a year. Cities also may tax business based on their profits - how much money they make less expenses - or their gross receipts - how much they collect in sales, fees, etc.

Insurance Premium Taxes

Most cities have a tax on insurance premiums as well. People pay insurance companies premiums for an agreement that the company will pay the person if something happened. For example, your family probably has homeowners insurance, which would give you money if something bad unexpectedly happened to your home (like if hail severely damaged your roof). So, people who buy insurance usually pay a tax on the amount of the premium they pay.

Tourism Taxes

Some Kentucky cities also tax what people pay to stay in hotels and/or how much they pay at restaurants. Those tax dollars go must be used to promote local tourism.


Cities also collect over $1.5 billion in fees. Fees are what residents and businesses pay for certain services. These often include: drinking water, sewer services, parking, trash collection, recreation activities, and more. Unlike most taxes that can be used to pay for almost anything the city does, fees generally are limited to providing the specific service that payment of the fee gets. For instance, when your family pays its water bill, the city spends the fee on workers, operation, maintenance, or construction of the water system.

Where Do the Taxes Go?

Your family pays taxes to the federal government, state government, city and county governments, and special districts. Federal taxes are used to pay for things such as the miliary and programs to help low-income citizens. State taxes go toward such things as public schools and state roadways. Local taxes pay for things like police, fire, parks and recreation, and garbage collection. Special district taxes might include things like conservation and libraries.

Other Articles:
Copyright © 2019 - KLC