Voters abolish local government over income tax

Hat-tip to Jared Walczak at the Tax Foundation for pointing out this worthwhile read in the New York Times about an Ohio village where voters decided to abolish their local government in order to fend off a tax increase.

Residents of Amelia, Ohio voted to disband the local political subdivision after their council imposed a 1% local income tax reportedly without giving notice to residents.

Though local income taxes are not very common in the United States, a number of Midwestern and Mid-Atlantic states allow local political subdivisions to levy them.

Some may bristle at the anti-tax sentiment shown in this story, but there is something refreshingly American to me about the local activists referring to the tax, which was clearly imposed in a shady way, as tyranny.

It also seems the issue was not as simple as people in Amelia not wanting to pay a 1% tax, though it would have raised taxes about $600 a year for the median income resident. They also felt the decision was made without their input and their tax dollars were misused.

Some in Nebraska have advocated for a local income tax here. We have consistently opposed that policy at the Platte Institute.

Technically, there is already a type of local income tax for school districts in Nebraska incorporated into the state income tax. It’s called allocated income tax, and it’s why you have to indicate what school district you live in on your state income tax form.

If senators want to increase the percentage of income tax receipts that automatically go to schools, that’s their prerogative. Of course, that means they would have to pare back spending in other areas of the state budget.

That approach would be more accountable to the taxpayers than simply levying a higher tax.

A number of years ago, there was a bill for a local income tax that would have allowed school districts to raise your state income tax bill by nearly 30% as long as a supermajority of your school board was OK with it. That didn’t seem like a very high bar.

Besides, Nebraska’s top personal income tax rate is already on the high side at 6.84%. In Ohio, the top state income tax rate is 5%, while many residents pay less since their top rate kicks in at a six-figure level of income.

It’s eye-opening to consider that residents in Amelia considered a tax rate that would still be lower than Nebraska’s to be a tyranny that justified abolishing their local government, while others in Nebraska think our already hefty income tax is too low.