Toledo’s income tax has remained constant for more than 30 years at 2.25 percent — even as keeping up city services on that source of revenue has gotten tougher.
City lawmakers have occasionally suggested raising the tax, such as by boosting the “temporary” 0.75-percent portion to 1 percent, but in the current campaign for mayor neither candidate is calling for an increase. And one of them — ironically, the candidate backed by the Ohio Democratic Party — is advocating a tax cut.
Incumbent Mayor Mike Bell boasts that he balanced the city budget, kept services going, and began to rebuild the decreased ranks of the police and fire departments without raising taxes. But that doesn’t mean he didn’t try. In 2010, Mr. Bell temporarily eliminated the tax credit given to people who live outside of Toledo but work in the city, and he attempted, unsuccessfully, to attach an 8 percent city tax to Toledo Mud Hens and Walleye tickets, and other entertainment events. However, he never proposed raising the 2.25 percent income tax.
Mr. Bell, a political independent, said he’s not advocating a tax increase. That’s for the voters to decide.
“I have no intentions of raising taxes because I don’t see a gain in being able to market our city,” Mr. Bell said.
His challenger, Councilman D. Michael Collins, also a political independent, has proposed making the 0.75-percent tax, which is up for renewal by voters every four years, permanent. He contends that would settle uncertainty in the bond markets and result in a slightly better bond rating — and thus lower interest rates.
To get voters to give up their four-year oversight of the temporary tax, Mr. Collins proposes a slight reduction from the current total of 2.25 percent to 2.2 percent.
Such a move would cost Toledo $3.6 million a year, but Mr. Collins contends the positive signal that would be sent to the business community and the improved interest rates on Wall Street would make up for that lost revenue.
“There are those who would say this is trickle-down economics. I understand that assumption, but the reality isn’t there,” Mr. Collins said. He thinks it would improve Toledo’s competitiveness compared with other cities. “It speaks to the businesses, especially the small and medium businesses, that doing business in Toledo is cheaper.”
He also plans a restructuring of city government that would lower costs, in part by eliminating administrative positions that he said have piled up over the years.
Mr. Bell says Mr. Collins’ plan is wildly unrealistic and incompatible with other parts of his platform, such as to reopen the Northwest District Police Station, give more funding to homeless shelters, and hire more police officers. And he said there are not enough administration positions to cut in order to save $3.6 million.
“To propose something like that means you totally don’t have an understanding of city finance and how things are needed to keep this thing running and stabilized,” the mayor said.
He noted that the city is still relying heavily on the capital improvements portion of the income tax, something that was approved by voters in 2010 to help the city get by after the Great Recession. In 2013, the city is counting on $14.1 million from the capital improvements fund to pay for ongoing operations.
“So that gives you a $17.7 million hole you’ve got to try to figure out how to fix,” Mr. Bell said, adding the cost of the tax cut and the capital improvements borrowing.
Mr. Collins is backed by the Ohio Democratic Party, while Mr. Bell has the support of Lucas County Republicans and Ohio Republican Gov. John Kasich.
The history of the income tax directly reflects Toledo’s economy. When Toledoans make money, either in business or in their paychecks, so does the city’s general fund.
The national recession was felt keenly in the municipal purse. Income tax revenues fell from $169.6 million in 2007 to $154.4 million the following year, and again in 2009 to $141.5 million, where they bottomed out.
Since then, income tax revenues have climbed back up, to $163.8 million projected for this year — but still about $6 million less than the peak year, 2007.
Over time, the income tax has dwindled slightly as the city’s major source of revenue, from 72 percent in 1993 to 67 percent projected for this year. But with other sources of funding threatened — including the recent repeal of the estate tax and huge cuts in the local tax subsidy from the state, the city’s budget has contracted to focus more on essential services. As a result, parks and recreation have nearly disappeared from the city’s budget, and trash collection is now handled by Lucas County.
Toledo’s current income tax is on the high side for area municipalities. Oregon, Holland, and Whitehouse also have a 2.25 percent rate. Bowling Green charges 2 percent. Maumee, Northwood, Perrysburg, Sylvania, Waterville, and Ottawa Hills charge 1.5 percent.
Statewide, Toledo is in the middle. Youngstown charges 2.75 percent; Columbus, 2.5 percent; Akron and Dayton, 2.25 percent; Cincinnati, 2.1 percent, and Cleveland, 2 percent, according to the Ohio Department of Taxation.
The idea of raising Toledo’s tax rate surfaces from time to time. In 2009, then-Mayor Carty Finkbeiner floated raising taxes and publicly encouraged two candidates that year, Democrat Keith Wilkowski and independent Mike Bell, to consider raising the payroll tax. Neither one bit.
City Councilman Lindsay Webb said she sees little public support for a tax increase among voters, as proven by the defeat last year of a proposed recreation property tax levy. Nor does she think making the income tax permanent is important enough to reduce the tax rate. She said voters in Toledo need more confidence that their taxes are being well-used before an increase in taxes to support new services will be politically viable.
“We have a ways to go in improving city services. At this juncture the thing for any mayoral candidate is to improve city services and show how an increase in taxes would directly benefit the citizens,” Ms. Webb said.