A legislative 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 wide-ranging tax bill being considered by the Kentucky legislature that is in the state Senate for a second time after having been vetoed earlier by Gov. Andy Beshear.
The bill, House Bill 8, would reduce the state income tax and replace the lost income with a series of taxes on services. A provision to include financial advisory services in the tax was eliminated after lobbying efforts by the FPA and other groups.
“While FPA was not the only group lobbying to have the bill amended, we know that our efforts directly influenced the outcome and, most importantly, protected our Kentucky members,” FPA CEO Patrick D. Mahoney said in a prepared statement.
The victory is significant because other states are considering similar measures to tax services to raise additional revenue, the FPA said.
“While FPA’s efforts were reactive to what was transpiring in Kentucky, the association did it with a broader strategic focus to thwart similar actions across the nation. Given a history of states proposing such taxes, a victory like this lessens the opportunity for states to use precedent as justification,” the organization said.
“FPA will continue to provide our members with a voice and is ready to deploy its resources to protect them and their interests. Over the past few 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 to require financial education as part of the high school curriculum, which means lawmakers recognize the need to support their citizens in making better financial decisions. The taxation of financial planning services would have been counterproductive, the group argued.
In addition, the demand for financial planning services has never been increasing, the FPA said. A recent survey by John Hancock reported that 74% of those working with a financial planner were on track or ahead in saving for retirement, compared to 45% of those not working with a financial planner.
The FPA also said taxing personal financial planning and personal investment services decreased an individual’s rate of return on investments. With the cost of living rising, investors and savers shouldn’t have to choose between paying for everyday 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 clients.