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Payroll taxes going everywhere
(by Dave Lange - July 28, 2010)
COUNTY LINE, BY DAVE LANGE
Payroll taxes going everywhere
There's been a lot of talk lately about income taxes.
It used to be that income taxes were the domain of the federal government, while sales taxes supported state government, and property taxes funded local services, mostly the public schools. But, eventually, people's paychecks became fair game for city halls and village halls too. And nowadays, some school districts are taking a cut and, even townships, which cannot levy income taxes on their own, have found a way to juke the system.
Nearly every municipality collects income taxes from the people who earn a living within their borders, and many also take a share from residents who work elsewhere. Locally, the payroll taxes range from 2 percent in Chardon, Orange and Solon to 1 percent in Moreland Hills, Pepper Pike and South Russell.
The City of Pepper Pike, citing a financial crisis, is asking voters to approve a measure on the Aug. 3 ballot that would increase its income tax to 1.5 percent, the same amount that's taxed by the Village of Chagrin Falls.
Meanwhile, in neighboring Orange Village, which is in the midst of an ongoing political crisis, a group of citizens is circulating an initiative petition to reduce the municipal income tax to 1.5 percent.
The Village of South Russell plans to place a measure on the November ballot that will ask residents to increase the tax there to 1.25 percent.
An essential argument that's made in favor of collecting local payroll taxes is that people who work in a community but do not live there still benefit from such costly services as police and fire protection and infrastructure construction and maintenance. Of course, the owners of businesses that employ workers who live elsewhere do pay property taxes, just like homeowners, except for those that get special tax-abatement treatment from the same government that collects the income taxes.
This May, voters in the Chardon School District basically told their board of education to stuff it when they were asked to approve a 1 percent earned-income tax.
School districts, in particular, have been calling it a tax on "earned" income, because people who don't earn their income, including Social Security, pensions, collections on investments and even multimillion-dollar lottery winnings, don't have to pay it. Some people who actually work for their money don't particularly like that idea.
Among more than 600 school districts in the state, 178 have approved income taxes since the Ohio General Assembly granted them that right in the 1980s. Few of them are in Northeast Ohio, none in Cuyahoga County. Only one, Berkshire, is in Geauga County.
Supposedly, the earned-income tax for schools is an attractive alternative to the increasingly despised property tax. But the latter is more fair, because people who can afford more valuable properties also should be able to support the schools that greatly affect home values.
Townships, according to the Ohio Revised Code, cannot collect income taxes. But in 1993, the Ohio General Assembly gave them the ability to break the code by forming joint economic development districts with neighboring cities or villages. Thus, Bainbridge Township formed a JEDD with Solon so that the city could collect taxes from people working in a Bainbridge shopping center and split the proceeds with the township.
It is a strange taxing world that we live in.
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