School funding: Property tax versus two different kinds of income tax…
There are three ways a public school system can receive local funding, property tax, a traditional income tax and an earned income tax. As part of the beginning discussion on this, I thought it would be helpful to provide some material/information on the two different types of income taxes that a public school district can go before voters to seek. I’m sure this is going to be a topic we discuss in the days to come and there will be those of you have strong opinions on both sides of the issue. The purpose of this is so we start out with a basic knowledge of the options.
The Department of Ohio Taxation gives some of the basics on page 2:
Traditional Tax Base School District Method – Ohio Revised Code sections 5748.01(E)(1)(a) and 5748.01(E)(2) provide that the voters in each school district can vote to enact a school district income tax based upon income and deductions shown on the Ohio income tax return. Under these provisions of the law, individuals pay the school district income tax based upon Ohio taxable income (Ohio adjusted gross income less the exemption amount) as shown on line 5 of Ohio form IT 1040 or IT 1040EZ, and estates pay the school district income tax based upon Ohio taxable income as shown on line 3 of Ohio form IT 1041. Until recently, this method of taxation was the only method available to school district voters. Taxpayers residing in traditional tax base school districts must file Ohio form SD 100 even if none of their income is subject to the tax.
Earned Income Only Tax Base School District Method – Ohio Revised Code section 5748.01(E)(1)(b) provides that voters in a school district can approve a school district income tax that will apply only to individuals – not to estates – and will apply only to each individual’s earned income without any deductions. This method of taxation is an alternative to the traditional tax base school district method. For a listing of earned income only school districts, see page 9 of these instructions.“Earned income” is defined as wages, salaries, tips, other employee compensation, and self-employment income from sole proprietorships and partnerships.
There are currently 19 Public School districts in Ohio that used the “earned income only tax” and almost 200 that use the traditional income tax method out of the over 600 public school districts in Ohio. Clyde-Green Springs EVSD, Eastwood LSD and North Baltimore LSD are the only schools currently in NWO that use the “earned income only tax.” Bowling Green CSD, Elmwood LSD, Evergreen LSD, Liberty Center LSD, Swanton LSD, Otsego LSD, Perrysburg EVSD, Pettisville LSD are among some of those from this area that use the “traditional tax base method,” there are quite a few other public school districts in Northwest Ohio, especially in Hancock and Sandusky counties that use that as a funding method.
For those of you wanting to delve even deeper, I found this dissertation online, by Susan Miko that I found to be informative as to some of the tax questions. Though it was more specific to rural districts, it’s well worth the time to read for the historical and statistical information shared.
If one is to believe the 2/5/2010 TPS announcement of the 2/10/2010 8:30 am special board meeting as to purpose of the meeting,
TPS will place a .75% continuing income tax on earned income (wages, tips, self employment..) on the May 4th ballot.
February 7th, 2010 at 12:39 pmThere’s some important points here – CONTINUING…meaning once it is voted in – it remains and the district or its elected officials are not under any restraint to gain voter approval for any renewal. That scares me. Plus the district has not indicated to the public what cuts are considered. But if the voting public isn’t interested and/or doesn’t call upon its elected officials – then all remain mum. What about consideration for a 4 day week for high school – what cost cuts would occur? Is that even possible? What would be the advantages or disadvantages of such schedules. TPS has a mind set – higher taxes is the only measure. 2 other important points – property valuations are down so that may be the reason to consider an income tax – but then what burden does the administration of that tax put on employers or will citizens be required to fill a separate return for this sole tax? The district has already noted that to administer it on their side an employee will be required for this function. Additionally there is the loss of state funding in which no one is really quite sure why that is. The board was supposed to meet with state reps and learn if something could be adjusted at the State level but no one has reported that happening or if anything can be done anyway. Keep in mind the district has lost students each and every year so the state foundation amounts continue to go down. Question is has the expenses been cut to reflect the current enrollment?
Then if this measure fails, they have until June 30th to make up cuts in the amount of the $30M shortfall. What will those cuts look like – can we still maintain education to a decent degree?
Lastly this will tax only those who live in the Toledo district – so many AFSCME members live within the district and they will be voting basically to reduce their pay by this tax but those TPS employees who live outside the district will not – it will be interesting to see what happens in terms of support for this.
Will the vote to increase your taxes be 5-0? Will any of the 5 electeds be at all concerned about raising your taxes without advising the community how they plan to cut expenses. Keep in mind at least 2 board members would not be affected by an “income” tax unless they become emplolyed at some point. Finally if the measure for the city goes on at the same time – which will you pick – both tax increases or just one or none….2/10 is just days away.
February 7th, 2010 at 4:20 pm