INDEPENDENCE — People who worked in Kenton County and earned more than $25,000 in 2001 can expect refunds in early February because part of a contested payroll tax increase was repealed Tuesday.

        It is unclear how much will be refunded, but for some taxpayers it could be nearly $300.

        The Kenton Fiscal Court voted 3-0 Tuesday to stop collecting the transportation portion of the county's payroll tax increase, effective Jan. 1, and to refund the tax increase already collected.

        But questions were raised about who is eligible for the refund.

        Only people who worked in Kenton County and made more than $25,000 in 2001 would qualify. Anyone who is retired, or who works outside Kenton County, including Cincinnati, does not qualify.

        County Treasurer Ivan Frye is expected to present a plan for paying the refunds, with interest, by Jan. 8. He also is expected to make a presentation at next week's fiscal court meeting showing how workers will be affected.

        The payroll tax increase took effect Jan. 1. In some cases, that increase amounted to a 275-percent jump in actual taxes for some workers.

        The Kenton Fiscal Court had wanted higher payroll taxes to offset the general funds it planned to use to build a new jail, which authorities say is much needed but which has generated much debate.

        Earlier this year the City of Covington and others challenged the tax boost in court. A Kenton Circuit Court judge deemed the bulk of the tax increase - the amount slated for transportation - invalid.

        A small portion, or 14 cents per $1,000 of earnings, were considered valid. That would pay for senior services and mental health/mental retardation.

        The county is appealing the ruling to the Kentucky Court of Appeals, a process that could take two to three years.

        Meanwhile, businesses ending their fourth quarter on Dec. 31 are instructed to not pay the increased payroll tax because the county will stop collecting it after Jan. 1.

        Mark Guilfoyle, an attorney for two parties in lawsuit against the tax increase, questioned whether the way the county is retracting its tax increase - through an executive order by the county judge-executive - will stand up in court. He suggested this may be a way for the county to recoup its refunds.

        “Any first-year law student can tell you that you can't repeal an ordinance with an executive order,” Mr. Guilfoyle said.

        “The Kenton County payroll tax rate is fixed by ordinance, and it takes another ordinance to amend or repeal the original ordinance.

        “Clearly, the county is keeping its options open on recouping the money that it is getting ready to refund,” he added. “It sets up the very real possibility that in a few years, we will be taxed, not just for that year, but also for 2001. In effect, we will be double-taxed in some future year.”

        Kenton County Attorney Garry Edmondson denied that county officials were trying to double-tax workers, and he disagreed with Mr. Guilfoyle's interpretation of the law. Judge-executives, he said, do have authority to order the treasurer to suspend collection of a disputed portion of a tax, pending resolution in court, he said.

        “It is not a repeal of the ordinance,” Mr. Edmondson said. “It's an order of the judge-executive, who does have executory authority.”

        At any rate, the payroll tax refund won't affect Cincinnati residents who live in Kenton County.

        The city of Cincinnati has a 2.1 percent income tax that gives a credit for payroll taxes its residents pay to other counties. Cincinnati officials will not be collecting any of the refunds its residents who work in Kenton County receive, said Teresa Richter, tax commissioner for the City of Cincinnati.

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