HUNTINGTON — All three prongs of a reform package that would bring fundamental changes to the city of Huntington’s tax structure moved one step closer to passage Monday night.

Huntington City Council advanced to a second reading ordinances authorizing the implementation of a 1 percent occupation tax and 1 percent sales tax.

Also advancing was an ordinance that would eliminate or reduce portions of the business and occupation tax, viewed by many as a significant hurdle to attracting businesses to Huntington. The $3-a-week user fee also would be repealed.

Altogether, the package would result in $3.5 million of additional revenue per year for the city, according to estimates from its finance department. That’s the equivalent of a 9 percent increase in this year’s $40.2 million budget.

Dominating the conversation Monday night was the 1 percent occupation tax, which would take effect Oct. 1 of this year and trigger the repeal of the user fee. City officials are anticipating it will generate about $8 million per year. The user fee generates $4.5 million annually.

The original version of the proposal would have capped taxable income at $100,000 per year, meaning someone who works in the city would pay no more than $1,000.

Councilman Scott Caserta, however, made an amendment to remove the cap that was approved by a 7-3 vote. Caserta said he viewed the cap as giving tax breaks to the wealthy.

“If you want a tax, tax everyone equally across the board,” Caserta said. “Sorry, but don’t put it on the backs of the working class.”

Caserta’s amendment was opposed by councilmen Steve Williams, Nate Randolph and Mark Bates. Williams, who tried unsuccessfully to add a $200,000 cap after Caserta’s amendment passed, said an occupation tax without a ceiling will drive employers who provide high-paying jobs outside the city.

“Certain business leaders can easily structure their business so income is derived from outside city limits rather than the downtown,” he said. “There’s a very real probability that if we don’t include a cap, we are in essence placing a boundary around the city. Those who make a certain amount work outside the city and those who make less work inside the city.”

Williams also opined that removing a cap would offset any headway the city would make in economic development efforts by reducing business and occupation taxes.

“If (removing the cap) is to purely create more revenue, then we shouldn’t even be considering business and occupation tax changes,” he said.

Caserta countered by reading a sentence from the occupation tax ordinance that said its sole purpose was to increase revenue and not to regulate professions.

“That seems to explain it pretty clearly for me,” he said.

Williams attempted to add an exemption for those who make less than $10,000 in the city, but the amendment failed 9-1. Also failing by a 5-5 vote was an amendment by Councilman Mark Bates that would have allowed city residents to apply for a 25 percent refund on their occupation taxes.

The 1 percent sales tax would not take effect until April 1, 2011. It would generate $3.7 million annually, according to city Finance Department estimates, and apply to the same goods and services as the state sales tax.

Finance Director Deron Runyon said that upon City Council’s passage, the occupation tax and sales tax ordinances would be submitted to the state Home Rule Board for its review and approval. The city was given authority to adopt both taxes under its five-year home rule plan, of which the city is entering the third year.

The business and occupation tax changes also would take effect April 1, 2011. The tax on manufacturers, which generates $120,000 a year, would be eliminated, while the tax on retail- and service-based businesses would be reduced by half. The business and occupation tax for service-based businesses is the largest revenue-generating category at $4.4 million. The retail category of the tax generates $2.875 million.

The business and occupation tax is Huntington’s largest source of revenue and generates almost $16 million, or nearly 40 percent, of the city’s $40.2 million budget. The proposed changes to the tax would reduce that amount by $3.775 million.

The council is scheduled to vote on the tax reform ordinances at its July 26 meeting, unless Council Chairman Jim Insco calls for a special meeting before then.

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