Written by The Swamp Fox has already posted about this topic–many weeks ago–so it isn’t exactly breaking news at this point–but it’s just now getting the attention of Marion residents, so here he goes once again.
Let’s start with an example, using a hypothetical Marion man named John.
John lives in Marion but works in Crestline. Both Marion and Crestline have a 2.0% income tax rate.
Since John earned his income in Crestline, he has to pay Crestline 2% in income tax. He uses Crestline’s streets to get to work and things like its sewer and water while he’s at work, but other than that, his use of government services in Crestline is relatively minimal.
Meanwhile, although he doesn’t work in Marion and doesn’t earn income in Marion, John lives in Marion–using its infrastructure daily and benefiting more heartily from other services that the city offers.
As it stands now, since John paid Crestline’s 2% income tax, the city of Marion would give him a 100% credit on the taxes he paid to Crestline. Crestline gets his money and Marion gets squat from him–even though he’s using more of Marion’s infrastructure and services.
Under the proposed plan to eliminate the credit, John would pay Crestline 2% AND pay Marion 2%. That sucks for John, but benefits Marion.
Due to the city of Marion’s current status of fiscal distress, it needs to cut spending and increase revenue in order to balance its budget.
Spending cuts have been made, so now the city is looking to increase revenues.
With the sum total of fund deficits being about $9 million, it has some ground to make up.
Now, allow the Swamp Fox to make this clear: municipal income taxes are counterproductive to economic development. Cities like Marion would be much better off without an income tax, as private enterprise would be more equipped to turn a profit and more inclined to do business. More business and enterprise would mean more investment, more jobs, more sales tax revenue, and more property tax revenue (until we ax it).
That being said, the city of Marion is not in a position to eliminate its municipal income tax at this time. Hell, it really isn’t even in a position to be able to continue with the 100% tax credit offered to residents who work in another municipality that assesses an income tax. Hence, that’s why they’re being forced to eliminate the credit.
When Marion’s income tax was first established in 1959, it was set at 0.6% and no credit was offered to residents who paid income taxes elsewhere–not that it was relevant, since most places in Ohio didn’t have an income tax back then.
Over the years, the tax rate was gradually increased to its present 2.0% rate. During that time, there’s been zero credit, 50% credit up to whatever the rate was at the time, and now a 100% credit up to the 2.0% rate.
The credit was irresponsibly increased from 50% to 100% in 2023. Despite council and the Democratic Schertzer Administration being fully aware of the city’s financial issues, the increase in the tax credit was approved.
When you consider the demographics and economics of the city of Marion, most residents who are gainfully employed DO NOT work inside the city limits. These folks do, however, still provide wear and tear to the city’s infrastructure and benefit from its services.
Many other residents–many of whom are not gainfully employed–DO NOT have an income tax liability, so they pay nothing and still provide wear and tear to the infrastructure and benefit from city services.
When it comes to those poor unfortunate working stiffs who live in Marion and work elsewhere, the problem lies with the tax policies of the municipalities in which they work. In a just world, it would be those places that would offer a credit to these Marion workers–since they’re only there during work and are not likely using that municipality’s services, other than passive use of their infrastructure.
The city of Marion has no choice but to eliminate the credit at this point in time. However, once the financial crisis is over, its leaders need to commit to a reduction in income taxes, with the goal of a total or near total elimination of the income tax.
It can be done.
It must be done.
The Swamp Fox has attached a breakdown of the tax rates and tax credit rates for each municipality that assesses an income tax in our area, just to put things in perspective.
At the state level, as he’s mentioned before, there’s a direct correlation between lower income tax rates and economic development/GDP.
So let’s ax the income tax–eventually. But for the time being, let’s ax the credit.