ISSUE 32 - PROPOSED CHARTER AMENDMENT TO GIVE COUNCIL AUTHORITY TO REDUCE INCOME TAX CREDIT
Euclid City Council voted on June 4th to have the following question put to voters on November’s ballot: “Shall Article II, Section 12, of the Charter of the City of Euclid be amended to allow for City Council to adjust the income tax credit from 100% to no lower than 50% by a majority vote of Council?”
Section 12, entitled “Municipal Income Tax Credit”, presently reads: “When the taxable income or profits of a resident of the City of Euclid is subject to a municipal income tax in another municipality on the same income or profits taxable under the Charter or ordinances of the City of Euclid, a one hundred percent (100%) credit shall be allowed against Euclid income tax of the amount of net tax for which he is liable under the ordinances of the other municipality.” Euclid Codified Ordinances are accessible at: http://library.amlegal.com/nxt/gateway.dll/Ohio/euclid_oh/codifiedordinancesofthecityofeuclidohio?f=templates$fn=default.htm$3.0$vid=amlegal:euclid_oh .
A “yes” vote by a majority of the electorate would add the following language at the end: “City Council is authorized to adjust the income tax credit from 100% to no lower than 50% by a majority vote of Council.”
Our income tax rate is one of the highest in the state at 2.85%, though we currently get 100% credit for taxes we pay to the city in which we work. The amendment would give Council the authority to reduce that credit to 50%. In doing so, we will be potentially giving up one of the few tax breaks Euclid residents currently get. This could mean a jump in your total income tax paid to over 4%, depending on where you work.
Those of us who work in Cleveland currently pay 2.5% of our income to Cleveland and then, after the full credit, 0.35% to Euclid (2.5 % subtracted from 2.85%). If Council were to vote to reduce this credit to half, we would only get credit for 1.25% of the 2.5 % we pay to Cleveland. 2.85% minus 1.25% equals 1.6%, which is what we would then still owe to Euclid. That 1.6% plus the 2.5% we already pay to Cleveland would bring us up to 4.1% total paid in income taxes.
In case you want to calculate what it would be if you work in a different city, here is a list of rates for those who participate in CCA: http://ccatax.ci.cleveland.oh.us/?p=taxrates .
There is a downloadable rate table at this link for all Ohio municipalities, in case the one you are looking for doesn't participate in CCA: https://www.tax.ohio.gov/municipalities.aspx . The nice thing about the CCA link is that it includes the credits offered to residents of each City. Those credits only matter for the city you live in, but it is interesting to see the comparison since the credit is presently at issue here in our own city.
It's also important not to be TOO upset about Euclid's higher rate because lower rates can be deceiving. If I lived in New Carlisle, for example, I would only have to pay them 1.5%, but they offer 0% credit for what I pay to work in Cleveland. The 2.5% I pay Cleveland plus the 1.5% New Carlisle asks for would still bring me to 4%!
That said, our 100% tax credit is still a selling point for people who might otherwise be turned off by the shock of seeing that our rate is 2.85%. With the 100% credit we currently enjoy, no resident ever pays more than the 2.85%, whether we work in the city or not. That could change if this charter amendment passes.
It is, of course, possible that Council will not opt to reduce the credit by the entire 50%. It is also possible that they will never opt to adjust the credit at all. Since they are asking for the option, however, we have to make sure we are going to be OK with it if they do choose to exercise this authority they are seeking to adjust the income tax credit “from time to time when necessary” (as they put it in the ballot issue legislation).
To view the other city, county and state issues that we will be voting on in the November 6th election, you can preview your ballot at: https://boe.cuyahogacounty.us/en-US/ballot-search.aspx .