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School Districts Seek Income Taxes To Raise Revenue

Monday, October 31, 2011 at 8:15 AM

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Ohioans are used to paying property taxes to support their local schools, but some districts are now asking voters to pay taxes on their paychecks too. A quarter of the school issues on the November ballot are seeking an income tax. ideastream’s Michelle Kanu has the story.

Lorain City Schools hasn’t raised any new tax revenue since 1992.  Voters have supported renewals of the taxes they already pay, but they’ve shot down numerous attempts for new levies - four in just the last three years.  Now, with the loss of state aid and federal stimulus dollars totaling nine percent of the district’s operating budget, interim superintendent Ed Branham says the district is urgently seeking new money.

Branham: “Without new money, we will be facing in the next academic year an $11.3 to $12 million deficit.  We will end up in state receivership and in fiscal emergency.”

This time around, the district is proposing something different:  taxing earned income instead of property.  Branham says he’s hoping the 1.5 percent income tax proposal on the ballot will appeal to senior citizens who historically have rejected paying more in property taxes.

Branham: “If they’re on a pension, if they’re on social security, if they have an annuity, or dividends coming in, any of that income is not earned income.  They will not pay one dime.  Their taxes will not go up and they can support this issue.”

Across Ohio, public schools mostly depend on state funding and local property taxes for revenue.  Only 30 percent of districts also tax their residents’ paychecks.  But the approach is growing more popular as schools seek other ways to raise money. 

Damon Asbury is the legislative services director at the Ohio School Boards Association.  He says more districts are looking at income taxes to provide a money stream that can grow.

Asbury:  “Revenues from income taxes grow with inflation, whereas the property tax levies do not grow with inflation. And it also can relate to the characteristics.  If you have a community where you have mostly homeowners and very little industry, maybe income tax is the fairest way.”

Fairness is one reason why Medina City Schools are asking for a .5 percent income tax.  Due to changes in state funding, the district expects to lose $4 million in revenue over the next two years.  Superintendent Randy Stepp says asking for the income tax now spreads the burden to make up for that loss to all working Medina City residents, not just homeowners.

Stepp: “Here, if you’re earning the money, you pay it.  If you lose your job, you don’t have to pay it.  If your job changes, or your salary goes up or down, this tax changes with that increase or decrease.  So people see it as being a little more fair.”

But asking residents to approve an income tax can be a tough sell.  Black River Schools know this well.  The district is spread out over Medina, Ashland and Lorain counties, and failed to pass an income tax last November.  This time around, the district is asking residents for both a property levy and an income tax. 

Superintendent Janice Wyckoff admits she’s not banking on both.

Wyckoff:  “Our hope is really that one will pass.  We’re not really trying to be sneaky about it.  But we’re trying to fit what is best for a majority of the community members.”

Even if the income tax passes, Wykcoff says Black River won’t reap the benefits immediately.  Unlike property tax levies, districts typically don’t get the revenue from income taxes until 18 months after they’re approved.

Tags

Economy, Regional Economy/Business - Analysis and Trends, Education, Government/Politics

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