Beavercreek's proposed local income tax, and the accompanying reduction in property taxes, would change the source of much of the city's tax revenue from "people who live here" to "people who work here."

• It would charge a 1-1/2 percent tax on wages, salaries, commissions, and other compensation earned in Beavercreek by anyone who works here, regardless of where they live, and on the net profits of businesses operating here.

• Beavercreek residents would pay the tax only if they earn wages, salaries, commissions, or other compensation in Beavercreek or in an area that has a lower income tax rate or no local income tax at all.

• The tax would apply only to earned income, and not to pensions, investment income, unemployment benefits, or disability benefits.  It would also not apply to military pay or allowances.

• The tax revenue would only be used for the things funded and managed by the city government, such as police, streets, and general city obligations.  It would have nothing to do with the schools and fire department, because they are not managed by the city government and are funded with completely separate property tax levies.

• The same law that would enact the local income tax would mandate a corresponding reduction of the city's existing property tax levies.

If approved, the local income tax would have the following effects:

• Beavercreek residents who are retired, who are in the Armed Forces, or who already pay at least 1-1/2 percent in local income tax to any other city would pay less in total taxes than they currently do.

• Beavercreek residents who earn income but do not currently pay local income taxes on it could pay more in total taxes than they currently do, depending on the amount of their earned income and the appraised value of their property.

• Residents of other communities who work in Beavercreek would share some of the cost of providing the city's services, exactly as Beavercreek residents do for other communities.

• The city of Beavercreek would have a more stable--and perhaps greater--source of revenue to pay for city services and obligations, and a greater ability to attract new businesses to Beavercreek.

Background

Beavercreek operates differently from all the surrounding cities, which results in millions of dollars of Beavercreek residents' tax money being paid out to other cities and none from other cities being paid back here.

State law allows municipalities to tax compensation earned by residents and by non-residents working in the municipality, and all surrounding cities except Bellbrook do so.  A Kettering resident who works in Centerville, for example, pays city income taxes to Centerville.  And a Centerville resident who works in Kettering pays city income taxes to Kettering, so it sort of balances out.

But there's no "balancing out" for Beavercreek, because we have no municipal income tax.  A Beavercreek resident who works in Centerville pays city income tax to Centerville--but a Centerville resident who works in Beavercreek can't pay income tax to Beavercreek since there isn't one, so he or she pays it to Centerville.  It still gets paid, but not to us.  The other cities receive income tax revenue from Beavercreek residents and from their own residents, but Beavercreek doesn't receive any from anyone--so our property taxes make up the difference.

Everyone who pays Beavercreek property taxes, either directly or through their rental payments, is paying for part of that difference.  Beavercreek residents who earn their income in any of the surrounding communities (and therefore are already paying local income taxes in addition to Beavercreek property taxes) have the heaviest tax burden.  I don't know the exact numbers but there are many thousands of workers and millions of dollars in local income taxes being paid--all of it going to other cities, and none to Beavercreek.

Beavercreek residents who earn income in any of the cities shown below already pay local income tax.  Beavercreek's proposed tax law would give residents credit for 100% of taxes paid to any other city, up to the amount of Beavercreek's tax.

Because Beavercreek collects no local income tax, the city relies on property taxes to pay for police, streets, and other general city obligations.  The proposed income tax law would require Beavercreek city property tax levies to be reduced in proportion to income tax revenues, so property taxes would go down.

Here's how Beavercreek's local income tax would affect you, if it's placed on the ballot and approved by the voters.

• If you pay Beavercreek property taxes, your property tax rate would go down in proportion to the city's income tax revenues.

• If you rent your home and do not directly pay property taxes, your landlord may be able to tell you how much of your rent goes to property tax.

• If you live in Beavercreek and already pay an income tax of at least 1.5% to another city, your income taxes would not change.  You would still pay tax to the city where you work, and would not owe any income tax to Beavercreek.

• If you live in Beavercreek and work in a city where the tax rate is less than 1.5%, your income taxes would go up by the amount of the difference.  You would still pay tax at the lesser rate to the city where you work, and would owe the difference to Beavercreek.

• If you live in Beavercreek and earn income, but currently pay no city income tax because you work here or at Wright-Patterson, you would owe the full 1.5% tax to Beavercreek.  That could be more than you'd save on the reduced property taxes, depending on your income and the appraised value of your property.

• If you receive income from military pay or allowances, Social Security, public or private pensions, savings interest, IRA distributions, 401(k) distributions, capital gains, stock dividends, disability benefits, or unemployment insurance, you would not owe Beavercreek taxes on that income.

Using an income tax rather than only property tax to fund city obligations would have some general implications for the community.

• First, it would eliminate the one-way flow of local income taxes out of Beavercreek and into the surrounding communities.  Collecting local income taxes from residents of other communities who work in Beavercreek, exactly as those communities already collect tax from their Beavercreek-resident employees, would level the playing field.  It would generate more money for Beavercreek city obligations at less cost to most Beavercreek residents.

• Second, the revenue stream from income taxes is more stable and predictable than that collected from multiple separate property tax levies.  That gives the city the capability and responsibility of budgeting farther into the future than the end of the current property tax levy.  (Public visibility and accountability over use of public funds is still required.  See discussion on the Comments page).

• Third, it would enable Beavercreek to use property tax abatements to attract new businesses.  The employees of a new business in Beavercreek would pay income tax to Beavercreek, enabling the city to make up the lost property tax revenue.