Riverside residents who work outside the city will begin paying additional income taxes starting early next year after city council voted to reduce the income tax credit in half.
Decreasing the income tax credit from 1.5 percent to 0.75 percent is projected to generate $750,000 annually for the city, and council voted 6-1 to bring forward legislation that will earmark that money for capital improvements, such as fixing roads and purchasing police cars.
“I think it’s going to be a positive for the community as a whole,” Deputy Mayor Mike Denning said. “Those on council who voted yes all believe that it’s a more fair way to do it, and we also believe it’s a vision of things to come in communities all around the area.”
The vote to reduce the income tax credit passed 5-2 Thursday night, with Mayor Bill Flaute and Councilman Ed Schock voting against it.
“I am very disappointed that council chose to do that,” Flaute said. “If another income tax passes, I am hoping we will rescind this action.”
Riverside’s income tax rate is 1.5 percent. Nearly 5,300 Riverside residents work outside the city and do not pay any income tax to Riverside because they receive the full credit of 1.5 percent. That group makes up 55 percent of the working residents.
Councilman Mike Smith said reducing the income tax credit to 0.75 percent is 75 cents per $100.
“Let’s make it clear — it’s not a big tax,” Smith said.
A Riverside resident who works in Dayton — which has a 2.25 percent income tax rate — currently doesn’t pay any income tax to Riverside. Once the new income tax credit becomes effective Jan. 7, the resident will then pay 0.75 percent to Riverside and 3 percent total.
“The additional taxes is not going to allow me to take care of my family,” resident Connie Smith said. “I’m not going to be able to stay in Riverside. It’s not worth the additional burden on my family. I’m a nurse, and I have no choice but to work outside the city of Riverside. We’ll be leaving the area.”
Denning said council still plans to move forward on putting the city’s income tax rate request — increasing it from 1.5 percent to 2 percent — on the ballot in November 2013.
The city projects that increase would generate about $1.15 million per year in revenue beginning in 2014, and Denning would like to see that money earmarked as well.
“I believe the residents need to know we are being responsible with their money,” Denning said. “That it’s not just going into the big bucket of money. Let’s earmark it so we can improve the roads and do positive things when we need it.”
Reducing the income tax credit and increasing the city’s income tax rate have been two of the six options council has discussed in recent months in an effort to generate more revenue for the city.
“Obviously, I think it sets the tone that council is committed to not only maintain the level of services that we’re providing, but to become aggressive about addressing the deteriorating infrastructure in the city,” City Manager Bryan Chodkowski said.
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