YOUNGSTOWN McKelvey backs efforts to increase income tax

Without the tax, the city expects to lay off up to 50 more workers in January.
By ROGER G. SMITH
CITY HALL REPORTER
YOUNGSTOWN -- A proposed half-percent increase would give the city the highest income tax rate in the state. But, Mayor George M. McKelvey says, look at the alternatives.
The lack of realistic alternatives to the tax increase is a far bigger problem than the stigma of the highest income tax, he said Tuesday.
That's why McKelvey said he supports the safety forces' efforts to put an increase, to 2.75 percent, on the November ballot.
Police and firefighters gathered 1,500 signatures in 48 hours last week seeking to get the tax on the ballot. The Mahoning County elections board is to certify by Sept. 3 whether they succeeded. Supporters needed 540 registered voters to get it placed.
A half-percent increase would generate $7.2 million a year and bring back 15 firefighters and 11 officers who are laid off. The city is facing a roughly $2.5 million deficit caused by dropping revenue.
Arguments against increase
There are two main arguments against a tax increase: People can't afford it and higher taxes will drive away businesses. Lower taxes and create jobs to improve revenue, detractors say.
Ideally, the city would create lots of jobs, McKelvey said.
But to raise $7.2 million and return the safety forces without a tax increase, the city -- immediately -- would have to create 12,433 jobs that pay an average of $25,000, he said.
"I have to be very realistic. I don't see that happening. Absent that, we have to look at alternatives. That's what the safety forces have done," he said.
Many cities, except the big ones with large tax bases, are turning to tax increases to keep supplying services, McKelvey said. There is no other choice for those cities because their small tax bases are shrinking and can't keep up with taxpayer demand for services, he said.
A story in Sunday's Vindicator outlined the similarly bad or worse financial conditions in four other comparable Ohio cities.
A tax increase, however, will eliminate cuts in services and cost those who live or work in the city just 34 cents a day, based on a $25,000 income, McKelvey said.
"It all comes down to the level of service people want and how much they're willing to pay for it," he said.
Increase in '97
The city didn't see businesses fleeing the last time voters increased the income tax, in 1997, from 2 percent to 2.25 percent, McKelvey said.
Industrial parks still developed despite the increase, he said. The city's incentives -- property tax breaks and free land -- far outweighed the quarter-percent raise, he said.
McKelvey said businesses are more likely to flee if the city has fewer police and fire protection than if the tax goes up a half-percent.
Taxes certainly are among the main items that companies consider when deciding where to locate, said Julie Michael, the governor's economic development representative in the Mahoning Valley.
Businesses shop around for the best overall packages, she said. Fortunately, cities have other incentives to offer companies that counterbalance higher taxes, Michael said.
"They look at the entire picture. It's part of the formula," she said.
Nonetheless, higher taxes remain hard to deal with, she said. It's already hard for any development agency anywhere in Ohio to attract or keep businesses, she said. Higher taxes make the job harder, Michael said.
Looking ahead
Without the increase, however, the city expects to furlough up to 50 more workers in January, McKelvey said. About 30 police and firefighters likely will be among those, he said.
The city is facing a multimillion-dollar increase in workers' compensation costs in 2003 and flat revenue.
"That's not a threat. That's reality. That's being honest," McKelvey said.
The city already has 60 workers on layoff and shed nearly 50 others with a $10,000 incentive to resign or retire.
McKelvey said he wishes the city could be funded through a sales tax instead of an income tax, but Youngstown isn't set up that way.
Indeed, income taxes are most objectionable to groups like the Ohio Taxpayers Association, said Chairman Scott Pullins. The Columbus group is a nonpartisan, nonprofit organization that lobbies to limit taxes, spending and regulations. Membership includes individuals and corporations.
Sales tax is voluntary, and even property tax isn't as harmful as income tax, Pullins said. Income tax most stands in the way of creating wealth, he said.
Youngstown's new income tax would be a full quarter-percent higher than any city in the state.
The city of Columbus has compiled a list on its Web site -- www.columbustax.net/munilist.htm -- of more than 500 cities and villages in Ohio that charges income tax.
Nine cities have 2.25 percent income taxes, including Youngstown, Dayton and Toledo.
Five cities or villages have higher rates, 2.5 percent, including Campbell. Euclid has a 2.85 percent rate. Of that, however, only 2.38 percent goes to the city. Schools get the rest.
No cities charge their residents or those who work there more than 2.5 percent.
rgsmith@vindy.com