Sunday, October 29, 2006
Local Option Income Tax Offered as Affirmative Defense by Candidates Opposed to Hiked State Income Tax
Imagine my surprise when I went hunting for information about the Rockford School District election and found my idea for a local option income tax appear:
It would give half the new money raised to schools and half to property tax relief.
The idea delivered a mixed message, just as today’s Senate Bill 750 does.
It co-mingles the ideas of giving more money to schools with giving some real estate property tax relief.
I cogitated on Edgar’s idea for a while and finally worked out an idea that met the widely expressed desired to switch income taxes for property taxes.
It would consist of a local option income tax. It could be done school district by school district. Later, I conceived of a county-by-county version.
The way I remember it, a petition would be passed establishing an income tax rate. It would have to be approved by local referendum.
Because people were the ones complaining about property taxes, my bill would have limited the real estate tax relief to residential property.
Statewide, almost half of property taxes are paid by businesses. If you even wonder why businessmen can support a statewide income for property tax swap, keep in mind that business pays maybe 12% of the income tax collected (down from well over 20% during the early 1970’s).
So, a tax swap is a big tax cut for business as a whole.
Whatever money was raised through the local income tax in year one would be subtracted from the real estate taxes on residential property in year two.
Of course, there would be double taxation in the first year. But, I couldn’t figure out how to cut real estate taxes without having money in the bank to replace the taxes being abated.
The referendum debate would be vibrant. I know two local school administrators who live in modest homes. Their tax burden would increase. With no new money for schools, which way would they vote?
One could predict that senior citizens would vote for it, but how would working couples vote?
My guess is that they would do a comparison of both tax schemes and vote accordingly.
And, there would be educators who figured out that the income tax brings in different amounts of cash each year. It depends on the economy. Would they want to chance property taxes fluctuating significantly?
Any referendum increases in tax rates or for bonds would still be based on the old laws.
All of the money would stay local. For most of suburbia, the so-call tax swap being pushed by the Rev. and State Senator James Meeks would take money out of suburbia.
I can’t figure out a way to force landlords to push the savings through to renters. The best answer I have is to trust market forces. Certainly, when real estate taxes go up, rents increase.
Would the reverse happen? Can’t tell you, but theory says competition should play a significant role.
The Hononegah High School event was sponsored by "Fairer Funding for Illinois Schools," a group I have not heard of before.
(State Reps. Dave) Winters and (Ron) Wait referenced a local option income tax, which would let voters decide through a referendum to impose a local income tax to alleviate property taxes.Back in the mid-1970’s Jim Edgar, as a state representative, introduced the local income tax idea.
It would give half the new money raised to schools and half to property tax relief.
The idea delivered a mixed message, just as today’s Senate Bill 750 does.
It co-mingles the ideas of giving more money to schools with giving some real estate property tax relief.
I cogitated on Edgar’s idea for a while and finally worked out an idea that met the widely expressed desired to switch income taxes for property taxes.
It would consist of a local option income tax. It could be done school district by school district. Later, I conceived of a county-by-county version.
The way I remember it, a petition would be passed establishing an income tax rate. It would have to be approved by local referendum.
Because people were the ones complaining about property taxes, my bill would have limited the real estate tax relief to residential property.
Statewide, almost half of property taxes are paid by businesses. If you even wonder why businessmen can support a statewide income for property tax swap, keep in mind that business pays maybe 12% of the income tax collected (down from well over 20% during the early 1970’s).
So, a tax swap is a big tax cut for business as a whole.
Whatever money was raised through the local income tax in year one would be subtracted from the real estate taxes on residential property in year two.
Of course, there would be double taxation in the first year. But, I couldn’t figure out how to cut real estate taxes without having money in the bank to replace the taxes being abated.
The referendum debate would be vibrant. I know two local school administrators who live in modest homes. Their tax burden would increase. With no new money for schools, which way would they vote?
One could predict that senior citizens would vote for it, but how would working couples vote?
My guess is that they would do a comparison of both tax schemes and vote accordingly.
And, there would be educators who figured out that the income tax brings in different amounts of cash each year. It depends on the economy. Would they want to chance property taxes fluctuating significantly?
Any referendum increases in tax rates or for bonds would still be based on the old laws.
All of the money would stay local. For most of suburbia, the so-call tax swap being pushed by the Rev. and State Senator James Meeks would take money out of suburbia.
I can’t figure out a way to force landlords to push the savings through to renters. The best answer I have is to trust market forces. Certainly, when real estate taxes go up, rents increase.
Would the reverse happen? Can’t tell you, but theory says competition should play a significant role.
The Hononegah High School event was sponsored by "Fairer Funding for Illinois Schools," a group I have not heard of before.
Comments:
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Cal,
Real mixed emotions on the idea of a "Local Option Income Tax". Although I'm 14 years removed from the one-and-only tax year in my life that I had to pay municipal income taxes, the lessons are still fresh in my mind, and are refreshed each time I look at my old tax returns from that year when I had to pay 3 different municipalities in the state of Ohio income taxes.
How did that work? I lived in the city of Cincinnati, which imposed a 2.1% city income tax. However, Ohio law gave the city where you WORKED the first cut at the amount of city income tax that can be collected from a taxpayer. Ohio law also capped the percentage of city income tax collected to the higher of the competing municipalities (city where you live vs. city where you work).
For 8 of my 10 months in Ohio, I worked in the Cincinnati suburb of Reading, which imposed a 1.5% city income tax. With my city of residence being Cincinnati and its 2.1% income tax, I was obligated by the law to pay 1.5% of my income to the city of Reading, and the remaining 0.6% of the maximum 2.1% to the city of Cincinnati.
When my work location changed to the neighboring Cincinnati suburb of Blue Ash and its 1% city income tax for my final 2 months as an Ohio resident, my tax obligation to Cincinnati increased from 0.6% to 1.1%.
My situation was unique, given I lived, but did not work in Cincinnati. Most suburban residents simply pay the maximum 2.1% city income tax to Cincinnati, and their home municipality received 0 from these workers.
Because income taxes are a tax on one's individual productivity, instead on property, I can understand how Ohio law mandated the city of employment receiving first cut of a municipal income tax. Since most suburban residents do not live and work in the same local government (i.e. school districts), how can a local option income tax bring real property tax relief and keep a local taxpayer's local income tax in their home school district?
Real mixed emotions on the idea of a "Local Option Income Tax". Although I'm 14 years removed from the one-and-only tax year in my life that I had to pay municipal income taxes, the lessons are still fresh in my mind, and are refreshed each time I look at my old tax returns from that year when I had to pay 3 different municipalities in the state of Ohio income taxes.
How did that work? I lived in the city of Cincinnati, which imposed a 2.1% city income tax. However, Ohio law gave the city where you WORKED the first cut at the amount of city income tax that can be collected from a taxpayer. Ohio law also capped the percentage of city income tax collected to the higher of the competing municipalities (city where you live vs. city where you work).
For 8 of my 10 months in Ohio, I worked in the Cincinnati suburb of Reading, which imposed a 1.5% city income tax. With my city of residence being Cincinnati and its 2.1% income tax, I was obligated by the law to pay 1.5% of my income to the city of Reading, and the remaining 0.6% of the maximum 2.1% to the city of Cincinnati.
When my work location changed to the neighboring Cincinnati suburb of Blue Ash and its 1% city income tax for my final 2 months as an Ohio resident, my tax obligation to Cincinnati increased from 0.6% to 1.1%.
My situation was unique, given I lived, but did not work in Cincinnati. Most suburban residents simply pay the maximum 2.1% city income tax to Cincinnati, and their home municipality received 0 from these workers.
Because income taxes are a tax on one's individual productivity, instead on property, I can understand how Ohio law mandated the city of employment receiving first cut of a municipal income tax. Since most suburban residents do not live and work in the same local government (i.e. school districts), how can a local option income tax bring real property tax relief and keep a local taxpayer's local income tax in their home school district?
SB750
No matter what "swap" version is involved, if it doesn't prohibit (ex.) school districts from running referendums on top of what they'd be taking in or grabbing more in some other clever way - it's an insult to taxpayers.
If it doesn't include better management of funds districts already have or will have and it it doesn't guarantee a trip to jail for corruption or too many gosh golly "oopsies" by administrators or board members or consultants, it's an insult to taxpayers.
The current School Industry philosophy is and has been, in my opinion, to take every dollar that can be taken and then ask for more anyway....without care about reality. And every dollar WILL be spent as soon as possible instead of saving up for a rainy day when you need improvements to buildings or additional employees to fill certain positions.
The spend it or lose it on some revenue is also encouraging bad management.
Administrators, consultants and board members are disconnected by choice or by brain washing with regard to the fact every number on a computer page about budgets actually represents a dollar bill that did not stay in a taxpayers' household cookie jar, savings account, or piggy bank.
Turning the money and access to more money over to a political version of a "Drunken Sailor" is ridiculous.
So is telling all the Mommies and Daddies that the swap will do EQUAL good for all kids.
Swampland anyone?
No matter what "swap" version is involved, if it doesn't prohibit (ex.) school districts from running referendums on top of what they'd be taking in or grabbing more in some other clever way - it's an insult to taxpayers.
If it doesn't include better management of funds districts already have or will have and it it doesn't guarantee a trip to jail for corruption or too many gosh golly "oopsies" by administrators or board members or consultants, it's an insult to taxpayers.
The current School Industry philosophy is and has been, in my opinion, to take every dollar that can be taken and then ask for more anyway....without care about reality. And every dollar WILL be spent as soon as possible instead of saving up for a rainy day when you need improvements to buildings or additional employees to fill certain positions.
The spend it or lose it on some revenue is also encouraging bad management.
Administrators, consultants and board members are disconnected by choice or by brain washing with regard to the fact every number on a computer page about budgets actually represents a dollar bill that did not stay in a taxpayers' household cookie jar, savings account, or piggy bank.
Turning the money and access to more money over to a political version of a "Drunken Sailor" is ridiculous.
So is telling all the Mommies and Daddies that the swap will do EQUAL good for all kids.
Swampland anyone?
My district doesn't have tax caps, so I'm not up-to-date on the tax cap laws; but if the local option income tax bring in more local money to the school district, how will that affect state aid to the district?
As Mr. Snow remarked about the D300 referendum, any increase in local funding above a certain threashold will cut the district's state aid payments.
As Mr. Snow remarked about the D300 referendum, any increase in local funding above a certain threashold will cut the district's state aid payments.
Cal -
Here is thier web site http://www.ff4is.org/index.html
They appear to be a shadow organization. Won't say who they really are - but they link directly to www.aplusillinois.org.
I am not clear after reading about aplusillinois if they would raise overall taxes.. but it appears to be a redistribution scheme that allows for local taxes also.
Here is thier web site http://www.ff4is.org/index.html
They appear to be a shadow organization. Won't say who they really are - but they link directly to www.aplusillinois.org.
I am not clear after reading about aplusillinois if they would raise overall taxes.. but it appears to be a redistribution scheme that allows for local taxes also.
4Piggybanks2
I believe in general you are spot on. I have witnessed one noteable exception.
Davenport, Iowa had not built a new school or renovated one in 20 years. In fact, the high school I attended is now 101 years young (it is a magnificent three story stone structure). They new they needed to renovate and update alot of thier building, but how to do it economically and fund it? Being a place with some tourist trade and riverboat gambling, they recognized they could use a special use sales tax to fund it. And also, being a charter city in Iowa, they had local authority to create a local option tax. So off they set five years ago with a modest sales tax increase and a 10 year modernization plan. How has it worked? Instead of building a $15million replacement for that highschool, they invested $3.5m in renovations and have a marvelous grand modern building.
So the real problem here continues to be lack of good management and sound fiscal responsibility..how come our nieghbors in Iowa can figure it out and we can't?
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I believe in general you are spot on. I have witnessed one noteable exception.
Davenport, Iowa had not built a new school or renovated one in 20 years. In fact, the high school I attended is now 101 years young (it is a magnificent three story stone structure). They new they needed to renovate and update alot of thier building, but how to do it economically and fund it? Being a place with some tourist trade and riverboat gambling, they recognized they could use a special use sales tax to fund it. And also, being a charter city in Iowa, they had local authority to create a local option tax. So off they set five years ago with a modest sales tax increase and a 10 year modernization plan. How has it worked? Instead of building a $15million replacement for that highschool, they invested $3.5m in renovations and have a marvelous grand modern building.
So the real problem here continues to be lack of good management and sound fiscal responsibility..how come our nieghbors in Iowa can figure it out and we can't?
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