A weeklong beach vacation … a year’s worth of car payments … almost a year of community college tuition — at its extreme, that’s the difference local tax burden can make from one community to another in the Dayton area.
Local tax bills can vary as much as $3,000 per year for similar middle-class households, significantly affecting family finances, according to a Dayton Daily News investigation.
The widespread disparities are the result of many factors that are often misunderstood. This story is designed to bring some clarity to the overwhelmingly confusing ways local taxes are determined, and give voters information that perhaps they can use the next time they are asked to approve a school levy or other tax measure.
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It’s not true that voters reflexively say no to tax issues. Renewal levies that call for no new money typically have a very high passage rate throughout Ohio — better than 90 percent on school issues. But communities that want to raise taxes have a much more difficult, though not impossible, sell. In a four-county area that includes Montgomery, Greene, Miami and Warren counties, voters passed 11 of 18 issues seeking a tax increase on Nov. 6.
One of those that didn’t pass — a proposed school levy increase in Beavercreek — illustrates a common complaint from voters when tax proposals are rejected.
A post on the Beavercreek schools Facebook page the day after their levy was turned down drew almost 200 comments. Although some argued the school taxes were a worthwhile investment, others said Beavercreek needs to make do with the money it already has, and that retirees are “at risk of being pushed out of the community by rising taxes.”
Real anger was palpable in some of the responses.
“It continues to be frustrating that our kids’ education is so tightly connected to if the levy passes or not,” read one.
“Obviously, the funding situation is broken and needs more than just huge levies,” read another.
“We are already taxed so much in Beavercreek,” began another one.
ELECTION TAX STORIES
Kris McClintick, administrator for Harrison Twp. in Montgomery County, said an individual community’s tax burden is often a function of what its citizens said they wanted in past elections: better roads, better schools, and better services.
“If you look at your whole tax figure, you’re saying, gosh, it’s so high,” he said. “But if you look at it under a microscope, each one of those (taxes) is very important. On that micro level, I think you get a pretty good deal for what you’re paying.”
What’s difficult for many voters to understand is the local tax mix depends on multiple variables — where you live, where you work and what school district you’re a part of.
A majority of property taxes go to public schools, while city income taxes are paid primarily to the city where you work. Some school districts rely on income taxes, but they are mostly in rural, farm communities.
But determining what any one individual pays can get complicated. For example, someone who lives in Beavercreek, which doesn’t have a city income tax, gets that benefit only if they work in Beavercreek or a township. If they work in Dayton, Oakwood or Moraine — which tie for the area’s highest income tax at 2.5 percent — they are paying that plus whatever they are paying in property taxes.
The same goes for someone who lives in the Harrison Twp./Northridge schools community. Because it’s a township, there’s no income tax. But there’s not a lot of jobs there either, so typically a resident will pay income taxes elsewhere — say, in Dayton — and also pay property taxes for the schools, which in this case are on the high end compared to other communities in the Dayton area.
How does that impact taxpayers? Here’s an example: Take two hypothetical $50,000 income families, both living in $100,000 homes. One family lives in Harrison Twp. within the Northridge school district and pays income taxes in Dayton. That family’s bill from local income tax and property taxes would come to about $5,250 per year.
The second family lives in Xenia Twp. and the Xenia school district and works in Beavercreek, which doesn’t have a city income tax. In this scenario, property taxes are about half what they are in the Harrison Twp./Northridge district, and while the Xenia school district has its own 0.5 percent school income tax, it would cost this family only about $250 a year.
Therefore, family No. 2 would have an annual local tax bill of $2,120 – $3,130 less than Family No. 1. And that’s before differences in sales tax, which is 7.5 percent in Montgomery County and 6.75 percent in Greene County.
“It really all comes down to tax base,” Kettering City Manager Mark Schwieterman said. A community with higher property values can raise more levy money to run its schools. A community with lots of businesses can fund good city services (police, parks, etc.) with an income tax on those employees.
No two levies alike
Here’s another wrench that school districts, particularly in urban settings, deal with. Say both the Trotwood and Oakwood school districts have 6 mill levies on the ballot. A 6-mill levy would cost the owner of a $200,000 home the same in both Trotwood and Oakwood. But what if most of the homes in your community are valued at $50,000, not $200,000?
Janice Allen, treasurer for Trotwood schools, has the answer: you raise less money for the schools.
“One mill (of property tax) only brings in $211,482 in Trotwood,” Allen said. “You could do a story on Beavercreek, Oakwood, Vandalia, Kettering. We would have to pass so many more mills to get the same amount of revenue as theirs would. That’s the big difference. It’s huge.”
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The story is the same for cities and townships, McClintick points out. For example, he said, compare Harrison Twp. with Washington Twp., the wealthiest township in Montgomery County.
“Their one mill (produces the same) as about four mills here,” he said. “It’s not equitable, that’s for sure, but that’s the model we all live with. And it’s not like we get reduced costs for services because of our property values. It still costs the same to pave a road here or provide ambulance services.”
Richard Stock, director of the University of Dayton’s Business Research Group, said residents of lower-wealth communities often pay higher millage rates.
But, he said, there’s a trade off: Those residents get more house for their dollar and pay less in total tax dollars because of the lower home prices.
“A 250K house in Oakwood is probably equivalent in terms of the house itself to a 100K home in Dayton,” Stock said. “You’re trying to compare two similar households. But the reality is, two similar households with the same income levels in Dayton and Oakwood probably live in homes that are valued substantially differently.”
Local tax examples
Some communities tailor their taxes to the makeup of their community. Many schools in agricultural areas use a 1 to 2 percent school earned income tax and keep property taxes lower, which helps farms and large landowners.
Schwieterman said fitting the tax structure to a community makes sense.
“In Kettering we are fortunate to have a healthy mix of residential and business areas,” he said. “For our community, that means county services, libraries and our school district are well funded through property taxes. And there is a strong enough business presence to fund the vast majority of city services through income tax.”
But Schwieterman said tax burden is usually only a minor factor when people are choosing where to live.
“They look for safe neighborhoods, good schools and amenities that contribute to their quality of life,” he said.
Beavercreek City Manager Pete Landrum said his city’s lack of an income tax is less of a draw to businesses today because of all the tax abatements and economic development deals that other cities are giving. And he argued Beavercreek will eventually need an income tax — which voters have rejected on multiple occasions — so that nonresident workers pay their share of city services.
“The only way I see to have the city of Beavercreek step up to be a real city will be eventually an income tax,” he said. “Without it, we will not be able to maintain aging infrastructure.”
Currently, Beavercreek and Bellbrook are the only area cities without an income tax and are among just five cities in all of Ohio not to have one, according to Landrum.
During the recent levy campaign, some Beavercreek residents (who also pay Beavercreek schools taxes), lamented how high their property taxes are, noting that the 77 effective mills they pay are the highest in Greene County.
But the millage is 20 mills less than property owners in Oakwood pay, and about 15 mills less than Kettering residents will pay in 2019, now that voters approved a school levy this month.
The higher millage in Montgomery County is, in part, because of higher countywide taxes for human services levies, plus library, Sinclair and MetroParks levies.
Troy’s property tax (40 effective mills) is the lowest in the region, but the combined city and school earned income tax is 3.25 percent. That tax structure can affect two residents very differently. If you make a strong salary and live in a small house, you don’t benefit much, but if you’re house-rich and live on retirement/pensions, you benefit from the lower property tax rate.
Stock said local governments face a variety of different challenges. Some richer communities have raised fees for water and sewer and other services to make up for the loss of the estate tax. Counties face the burden of maintaining many roads on behalf of township governments. “And smaller jurisdictions come under tremendous pressure as a result of not having a (sufficient) taxable base,” Stock said.
McClintick said with Ohio cutting Local Government Fund money, and budgets not recovered from the recession, the impact is easy to understand.
“In Ohio, each jurisdiction has basically been put on their own,” he said. “If you’re lucky enough to live in a wealthier location, they’re going to have a better level of service than the areas where property values are lower.”
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