CLEVELAND – Mayor Frank Jackson is pushing for an increase of the city’s income tax by half a percent, from 2 to 2.5 percent, citing stagnant revenue amid growing costs. It would impact everyone who lives or works in the city and generate $83 million annually to maintain and improve city services, Jackson said. Otherwise, he said, cuts to services will be required.
Jackson laid out his rationale for the first increase in the city’s income tax since 1981 at a press conference Tuesday, noting that the city relies heavily on income taxes, which support 60 percent of Cleveland’s budget. While income tax revenue has increased since 2009, Jackson pointed to declines in other revenue sources.
“We got a problem in ‘17, a revenue issue,” Jackson said.
As the city recovered from the recession, it took an $18 million annual hit in property taxes due to foreclosure, according to Jackson’s presentation. The city has lost millions in annual revenue from red light and speed cameras. Additionally, state funding has fallen from about $50 million to $26 million since 2010, according to the city, while state leaders boast about a balanced budget and rainy day fun.
“They've balanced their budget… on the backs of urban centers,” Jackson said. “We're the ones who produce that revenue, but we do not see the benefit from it, and as a result of that, they're forcing the decision of tax increases on local communities.”
At the same time, Jackson said costs are up for 2016. Union contracts require nearly $28 million in salary and benefits increases, maintenance at the Justice Center totals $6 million, and obligations associated with the Department of Justice consent decree are expected to cost nearly $11 million, according to figures provided by the Jackson administration.
The proposed .5 percent tax increase would cost someone making $50,000 a year an extra $250. Jackson said a .25 percent increase would close the expected revenue and expense gap, but it would not allow for expanded city services.
“You don’t want to just get by, we want to be able to do well and do better,” Jackson said.
He did not specify which city services would be impacted by the income tax issue and said he’s “not concerned” that the tax hike could drive business elsewhere.
“I don’t see just because of a half a percent that those people would pick up all that investment they've made and the proximity to activity of Northeast Ohio and benefits of a Cleveland address as this time in our history,” Jackson said. “They can guarantee the streets will be plowed and people can get to and from work, that police will come when they get called.”
Any ballot measure would require city council’s approval. Councilman Zack Reed said he supports the increase.
“If not, we're going to have to have reduction of services and possible layoffs,” Reed said, adding he’d like to see the revenue raised go toward public safety.
While 88% of the people who work in Cleveland and pay the income tax live in suburbs, only Cleveland residents would be able to vote on the measure. Many said they’re weary of additional taxes.
“I think it's a bad idea,” said Linda McClary, a Cleveland resident who works at a downtown hotel.
Jackson said November is the earliest the proposal could head to the ballot.