Payroll Tax

Definition 

The City of Paducah levies an Occupational License Fee (employee payroll withholding tax, also known as payroll tax) of 2.0 percent as described and further amended in Sec. 106-182 of the Code of Ordinances.  This means that 2.0 percent of gross salaries, wages, commissions, and other compensation that is earned within the City limits should be remitted to the City of Paducah.  For Fiscal Year 2017, the payroll tax is expected to generate more than $20 million in revenue for the City.  The payroll tax is the City's largest revenue source.  The first 3/4 of the payroll tax revenue is placed in the General Fund which accounts for approximately 45 percent of the City's total General Fund revenue.   The remaining 1/4 of the payroll tax is placed in the Investment Fund.  For more information about the Payroll Tax and the Investment Fund, visit Track Your Tax Dollars

History

On August 9, 2005, the Paducah Board of Commissioners increased the payroll tax from 1.5 to 2.0 percent.   That increase became effective October 1, 2005 but was set to sunset on October 1, 2008.  On September 25, 2007, the Board of Commissioners voted to permanently amend the ordinance to maintain the payroll tax at 2.0 percent.  The revenue generated from the 1/2 percent increase in the payroll tax is placed into a special fund, the Investment Fund.  The fund is dedicated to the following expenditures:

  • Economic Development
  • Neighborhood Re-Development
  • Infrastructure Capital Investment
  • Property Tax Relief