“Collections are still not back to the (lower) pre-pandemic level, however they are trending downward,” she said.
Dayton collected $153.3 million in net income taxes last year, which was a $1.3 million decline from 2022 (-0.8%), according to city budget data.
Last fall, the city predicted it was going to end 2023 with about $2.8 million less in earnings tax revenue than in 2022. But collections turned out to be a little better than expected.
Last year was the first time that the city’s income tax revenues declined since 2010, though other years saw nearly flat collections, like 2020.
Income tax collections had increased by $8.8 million in 2022 (+6%) and $12.1 million in 2021 (+9%). Revenues rose just 0.1% in 2020, which was the first year of COVID, when there were massive layoffs and a stay-at-home order.
Income taxes account for nearly three-fourths of the city’s general fund budget, and therefore are crucial to public safety services, roadwork and other city functions.
Dayton saw “unprecedented” growth in tax receipts from business profits in 2021 and 2022, said Patel-Jones, but that revenue category declined nearly 35% in 2023. Dayton received more than $15 million from business profits last year, compared to more than $23 million in 2022.
Withholdings tax revenues increased 4% last year to more than $136 million. This revenue category also increased 4% in 2022.
Withholding is the amount of city income tax that is withheld on qualifying wages of employees of businesses either located within Dayton or doing business within the city.
After massive layoffs in 2020, the economy opened up with support from government monetary and fiscal stimulus in 2021 and 2022, Patel-Jones said.
Corporate profits across the nation reached record highs in 2021 and 2022, she said, but it appears there has been a correction and the economy is “normalizing” to pre-pandemic levels.
Dayton predicts it will collect about $155 million in income taxes this year, or $1.7 million more than in 2023 (+1.1%).
Since COVID, many people who used to work in Dayton — primarily in downtown — now work from home in other communities and may not be subject to Dayton city income tax.
Dayton budget officials for years have voiced concerns about the financial impact of a shift to remote work. The city has been issuing more refunds because of telework.
The city still hasn’t figured out a good way to tell how many people downtown are working from home, said Dayton City Manager Shelley Dickstein.
City leaders right now are heavily focused on passing Issue 6, which is a measure that would renew an income tax hike voters approved in 2016. The 0.25% piece of the city’s income tax generates roughly $15 million per year.
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