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A proposed income tax increase in Athens raises questions about who pays for services

By: David Forster
Posted on: Tuesday, November 26, 2024

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ATHENS, Ohio (WOUB) — Athens City Council members got a blunt assessment of the city’s financial situation at their meeting Monday night.

“The economy of Athens is not growing as fast as the cost of Athens,” Andy Stone, the city’s service-safety director, said.

City leaders are suggesting a 15.38 percent increase in the income tax, from 1.95 percent to 2.25 percent, to address this imbalance and avoid cuts to staff and services.

Concerns were raised at the meeting about who would end up paying the tax and whether there were other things the city could do to get its expenses under control.

Athens resident Mary Abel told council members she ran the numbers on the proposal and had some concerns.

Residents who earn $30,000 a year now pay $585 a year in city income taxes, she said. Under the proposed increase they would pay $675. For those earning $50,000, the tax would rise from $975 to $1,125.

“The proposed income tax increase is a real pocketbook issue for many of your constituents,” she said. “I doubt that many people in this city are going to receive a 15 percent increase in their income this year or next year.”

Abel encouraged city leaders to first take a hard look at the budget and see where cost-saving measures can be taken before putting a tax increase on the ballot.

Councilmember Alan Swank raised concerns about who would pay the tax, which applies only to people with taxable income. So, for example, some retirees on fixed incomes may not have to pay.

“Some of the voters will get to vote on a tax that they won’t pay, they won’t be subject to — a significant number of voters,” he said.

“And some people will have to pay this tax and they won’t get to vote on it,” he said. “Someone who lives in Albany, Glouster, Chauncey, The Plains, who works in the city of Athens will pay the tax but they won’t get to vote on it.”

Swank said the tax increase would generate more than $2.5 million in additional revenue. He said he would like more information about how that money would be spent.

“The city could use the money. But do we need the money?” he said. “And if we need it, what do we need it for?”

Swank suggested another option worth considering would be to raise property taxes instead. He said this would be more equitable because it would apply to more residents who benefit from city services.

Swank also suggested the city consider a smaller tax increase combined with some cost cutting to address the budget issues.

City Treasurer Josh Thomas noted that a property tax increase also raises issues about who pays. Ohio University is a heavy user of city services, fire services in particular, he said, but pays no property taxes.

And many people who live in surrounding communities, and would not pay the tax, come into Athens to use the pool or the soccer fields or they use the bus service to get around, which the city helps subsidize.

Thomas said property tax levies typically are used for specific purposes, such as building a new school or fire station. Income taxes are the preferred approach for general expenses, he said, and most cities the size of Athens have higher income taxes.

“We’ve dealt with a huge increase in inflation,” Thomas said. “Things cost more and they cost more for the city too. It’s not that the city gets a break on anything. We pay the same prices that everybody else does.”

Councilmember Michael Wood said he generally supports tax increases. “I support having more services for the city. I support having more staff,” he said.

But he wondered if the increase could be graduated based on income so it “would impact higher earners more than folks at the bottom end of the scale.”

It turns out that’s not an option because state law requires one flat rate for all.

Councilmember Micah McCarey asked about Plan B should the council put a tax increase on the May ballot and voters reject it.

Much of the city’s budget covers the cost of personnel, including steadily rising costs for health insurance and workers’ compensation.

“If it doesn’t pass,” Stone said, “it will be an exercise in priorities.”