FPA Lobbying Efforts Help Save Kentucky State Financial Services Tax
A statutory provision that would have taxed financial advisory services in Kentucky has been removed, the Financial Planning Association announced today.
The tax was included in a sweeping tax bill being considered by the Kentucky Legislature which is sitting in the state Senate for the second time after being vetoed by Governor Andy Beshear.
The bill, House Bill 8, would reduce state income tax and replace lost income with a series of service taxes. A provision to include financial advisory services in the tax was removed after lobbying efforts by the FPA and other groups.
“While the FPA was not the only group pushing for the bill to be changed, we know our efforts directly impacted the outcome and, most importantly, protected our Kentucky members,” the CEO said. of the FPA, Patrick D. Mahoney, in a prepared statement.
The victory is significant because other states are considering similar moves to tax services to generate additional revenue, the FPA said.
“While FPA’s efforts were reactive to what was happening in Kentucky, the association did so with a broader strategic focus to thwart similar actions across the country. Given the history of states proposing such taxes, a victory like this reduces the ability of states to use precedent as justification,” the organization said.
“The FPA will continue to give our members a voice and stands ready to deploy its resources to protect them and their interests. Over the past several weeks, what we have done in Kentucky will serve as a model for future legislative advocacy efforts for the association,” Mahoney said in a statement.
The FPA hired a lobbyist in Frankfort, Ky., to act on its behalf. The bill originally included a sales tax on “personal financial planning” and “personal investment management.”
The FPA argued that Kentucky has passed laws requiring financial education as part of the high school curriculum, which means lawmakers recognize the need to help their citizens make better financial decisions. Taxing financial planning services would have been counterproductive, the group argued.
Moreover, the demand for financial planning services has never increased, the FPA said. A recent survey by John Hancock found that 74% of those who worked with a financial planner were on track or ahead of saving for retirement, compared to 45% of those who did not work with a financial planner.
The FPA also said that taxing personal financial planning and personal investment services decreases an individual’s rate of return on investments. With the cost of living rising, investors and savers shouldn’t have to choose between paying day-to-day expenses and the costs of long-term planning, the FPA said.
The group also argued that taxing personal financial planning services increases the cost of financial planning services, which could be passed on to customers.