Local school districts say rising costs and waning financial support from state government have forced them to make some tough decisions lately. In an effort to cut back, several districts have laid off staff and announced plans to close buildings.
As school systems look to mitigate their financial woes, some are turning to a new idea for levy funding: an earned income tax levy.
In Hamilton County, North College Hill, Northwest Local, and Southwest Local, are all proposing new earned income tax levies for the upcoming election this fall. Fairfield, Franklin, and Lebanon are doing the same.
Earned income tax levies tax residents' wages and tips, excluding retirement and investment income. Traditional income tax levies are broader, taxing wages and tips, plus retirement income, investments, and capital gains. Schools have typically used property tax levies to fund operations, but as property values have jumped in recent years, taxpayers say they're being stretched to far.
While some districts see income tax levies as a potential solution amid those concerns, elsewhere the answer isn't so clear.
Cincinnati Public Schools axes income tax proposal at the last minute
Cincinnati Public Schools reversed course less than a week after its Board of Education voted to place an earned income tax on the November ballot, switching to a 7 mill property tax after receiving immediate opposition from local political parties and some in the school community.
Critics of the earned income tax proposal told the board the levy would be too much of a burden on working families who are already struggling to get by.
Mike Sobul, a retired school treasurer and former director of research for the Ohio Department of Taxation, wasn't surprised by the community's pushback. He says income taxes for schools are almost unheard of in Ohio's larger cities, especially compared to suburban and rural areas.
Department of Taxation data shows about a third of Ohio's public school districts currently levy either an earned or traditional income tax. Missing from that list are districts in the state's largest cities: Cincinnati, Cleveland, Columbus, Dayton, Toledo, and Akron. Those city governments tend to have higher municipal income taxes.
"There's been more resistance because the cities will say, 'Hey, that's our revenue source; go get your own,' and that's property taxes," Sobul told WVXU. "It can create tension with the cities in the more urban areas."
Recent analysis from the progressive think tank Policy Matters Ohio shows that as of last year, 92% of the state's school districts that collect an income tax are small-town or rural, and about 70% of those districts collect traditional income taxes.
Successful school income tax proposals in the communities that surround Ohio's larger cities are far less common. In Hamilton County, Wyoming City Schools currently collects a 1.25% traditional income tax after it passed two levies in 1989 and 1994. Southwest Local Schools has been levying a 0.75% earned income tax since 2007.
Mt. Healthy Schools recently won over voters during the May primary with a make-or-break 0.75% earned income tax that will allow it to retain sports and the arts amid a fiscal emergency. Mt. Healthy will begin collecting that tax in 2027. All other Southwest Ohio school districts that tried to pass income taxes in the same election failed.
In the Cleveland area, no local school districts in Cuyahoga County draw revenue from income taxes. Four Franklin County suburban districts outside Columbus currently levy income taxes ranging from 0.50% to 0.75%.
Shifting the financial responsibility
As property tax concerns persist across the state and districts look for different ways to raise funds, things could change. Sobul says more school districts are now trying to appeal to a group of voters who consistently show up at the polls; tend to oppose property tax increases; and often have less connection to local schools: retired seniors.
"They don't have skin in the game," he said. "[Earned income taxes] ease the burden for fixed-income seniors as far as having to pay for schools, and it puts more of the onus on younger families who are more likely to have kids in the district."
That appeal to retired voters hasn't yielded promising results just yet. The Ohio School Boards Association reports that in the May election, 75% of school income tax proposals on ballots failed.
Sobul says during difficult economic times, the difference between a successful and unsuccessful income tax levy comes down to how convincing a case districts can make to get people to open their wallets for what may be an unfamiliar tax.
"You have to really be able to show your residents why it's a better choice, and you have to get your residents to engage and be willing to listen. And that's not always an easy thing either," Sobul said.
Some school districts aren't taking the chance. In Hamilton County, Sycamore and Winton Woods will join Cincinnati Public in putting property tax measures on the ballot this fall.
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