#8216;Fairness#8217; hard to find with income taxes
Published 12:00 am Saturday, September 29, 2007
Upon hearing the word for the first time, many people have a hard time spelling “reciprocity,” much less explaining what it means.
Throw in income taxes and municipal fees and the whole discussion may become about as clear as mud for the average taxpayer.
But these two concepts are going to be important in coming months and city residents need to start paying attention now because the results of these discussions will likely affect taxpayers in the area they will most feel it: their pocketbooks.
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Three years ago, these two topics were the central focus of hours and hours of discussion at city council meetings. The debate was rarely unanimous and the ideological debate still hasn’t been completely resolved.
Rest assured these two things will be the center of debate in the near future.
One councilman has proposed modifying a law on the city books that is affectionately called the reciprocity agreement.
What does this mean? It is a little confusing, but I will do my best to explain.
First of all, Ironton has a 1 percent income tax, the highest allowable without being increased by a vote of the people.
Under Ohio law, individuals pay income taxes where they work, or if there isn’t an income tax there, individuals pay in the community in which they live.
Ironton had this reciprocity law on the books that many believe was instituted to avoid double taxation.
This law said that individuals who work in a municipality that has an income tax up to 1 percent would be absolved of paying the city of Ironton its 1 percent.
Three years ago, with a split vote by the city council, the reciprocity agreement was reduced to a 50 percent agreement. This mean that those working in communities with an income tax — Ashland, Ky., and Portsmouth are two good examples — would be required to pay 50 percent of Ironton’s income tax.
The theory behind this approach was a that individuals who live inside the city but work elsewhere should still be required to pay for services that don’t have specific fees associated with them. Police protection and having streets to drive on are two key examples.
While exact figures are not yet known, it was often projected that this change to reciprocity helped generate $300,000 for the city.
And the city needed — and still does — revenue to provide the services. Even with the change, city leaders later had to pass an $8 per month municipal fee to essentially balance the budget and maintain the status quo.
This fee is set to expire in the spring of 2008. Since city leaders have done little to cut expenses and revenue hasn’t increased near the levels needed, a municipal fee will likely be a hot topic for the new council and mayor.
Plans to re-implement the reciprocity just don’t make sense right now. In fact, it is going the wrong direction.
Is it fair that many residents have to work outside the city? No. Is it fair that these individuals are being asked to pay an income tax to two municipalities? Probably not. Is it fair that these individuals currently don’t contribute as much money as other city residents who work here? Nope.
If the reciprocity is changed back to 100 percent, it is very possible that city leaders will have to pass a larger municipal fee. That means people who work and live in the city will be asked to pay a lion’s share of the services that all residents receive.
That’s not fair either.
So the entire debate is fraught with unfairness. Is there a perfect solution that is fair to everyone? I don’t think so.
Just for the record, I currently only have to pay Ironton’s 1 percent income tax. My wife works in Kentucky, meaning these proposed changes would actually save my family money. But that still doesn’t mean it is the answer.
We all know that life isn’t fair. The current system is better than the proposed alternative because it means that all residents pay the service charges for sewer, water and garbage. All residents pay the municipal fee. And all residents pay at least some of the income tax that goes toward providing vital services.
It may not be totally fair but it is the best solution available right now.
Michael Caldwell is publisher of The Ironton Tribune. To reach him, call (740) 532-1445 ext. 24 or by e-mail at firstname.lastname@example.org.