Findlay’s Income Tax: Unsustainable and Anti-growth


Demographics, the Decline of the Middle Class and the Wage (Income) Tax

In the run up to the November election for issue #3, the City of Findlay’s request to make the quarter percent temporary income tax permanent (for a total rate of 1.25%) has been hotly contested.  The debate over the tax renewal largely revolved around the question of whether Findlay has a spending problem or a revenue problem.  After a two hour meeting with the City of Findlay Auditor Jim Staschiak II, I discovered that the City of Findlay has a demographic problem.  This demographic problem could be systemic and long term.

In an effort to explain Findlay’s financial position, Mr. Stashciak produced a graph he named “What’s the Employment Trend?” that illustrates that the number of employed individuals in Hancock County dipped in 1999 and has remained flat ever since, while total population continued a slow but steady rise.

Our population is aging, which is not really big news.  But, when you add in other demographic and economic factors and you understand how the City Income Tax really works, we may find that the City Income Tax cannot sustain the City of Findlay’s operations or capital improvements.

Let’s start with the City Income Tax.  First, the City income Tax is really a wage tax.  The income tax does not tax investment income, pensions or social security income.  And while the city income tax does tax businesses, the revenue that the City of Findlay receives from businesses is just a small percentage of revenue collected from the income tax.  This disparity between what businesses pay and wage earners pay means that workers, in effect, pay the city tax for the services they use and for the businesses where they work.

The second thing we need to know is that with the elimination of other taxes like the tangible property tax and the estate tax and the cut backs in state revenue sharing, the city wage tax has become the primary source of city financing.

So, we already know that our population is aging which means that fewer people are directly supporting the finances of the city.  But a key number that I do not have is the per capita wage tax receipts.

With fewer workers supporting a larger population we are already starting in a hole.  But what if those workers are, on average, making less money?  Given the transition we have seen in Findlay of manufacturing jobs to the service industries and knowing that at least one major manufacturer in Findlay has a two-tier wage system, average wages could very well be in decline.  This combination of aging population and a workforce with a declining income or income that is not keeping up with inflation could spell real trouble for the City of Findlay.

If my hypothesis is right, the per capita wage tax receipts are in fact declining, that would mean the City of Findlay will be in a constant battle to match revenues with services.  It would also mean the traditional way of fixing a city’s flagging finances through growth could, in fact, make matters worse.

If we add businesses or build out subdivisions in Findlay that attract residents and workers that earn less and therefore pay less than our current per capita tax receipts, we would only be dragging down the average, making it harder for the City of Findlay to maintain its current level of services and provide service to support the growth.

We need to put some real math behind this issue.  We may find that the current tax base for the City of Findlay (and other cities in Ohio) that relies on a wage tax is unsustainable and anti-growth.

To find the graph referred to above and other information about the City of Findlay’s finances see the Auditor’s webpage: http://www.ci.findlay.oh.us/?id=57

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3 Responses to Findlay’s Income Tax: Unsustainable and Anti-growth

  1. don ILIFF says:

    The City needs a sales tax. The City also needs to attract business through public/private partnerships like a Civic Center on the East Side.

  2. Frank Beier says:

    Honestly, I think we need to take a serious look at the Michigan Renaissance Zones and see if we can implement something like this on the I-75 corridor and Co-Rd 99 and attract more businesses to Findlay.

    I moved to Findlay back in 2001 and joined the chamber that same year and was surprised how many businesses were part of the chamber. I believe at that time, it was around 1200 +/- 100. Today, when I look at the chamber business membership, it appears there are only around 700. However, I have no firm numbers to prove or disprove my information. It would be nice if someone could confirm actual numbers of businesses in Findlay and Hancock County from 1999 through current. If the number of businesses are down, then I think we need to find a better way to attract more businesses and higher wage businesses to Findlay. It would appear, these Renaissance Zones might be the ticket. Michigan now has 16 years worth of data to either support and dispute the practice.

    I have also seen the numbers and charts mentioned above and it is correct that the population has grown and employed population has shrunk. It is also apparent the number of adult workforce is flatlining and possibly indicating future declines. Furthermore, the total number of employed, which also indicates more part-time non-adult workers is down sharply over the past five years. Therefore, it appears not only is the total adult labor force shrinking but the youth labor force is also taking a hit. This data trend would appear to coincide with a decrease in small business shrinking, resulting in less seasonal employment for our area youth.

    All together, the trend is indicating our economic development is failing our community. It is time to put in place leadership that can turn our area into viable opportunity for business interest. We should do all we can to expand site ready property on the I-75 corridor and also look at expanding the Airport to allow for air-cargo distribution. This is an opportunity for Findlay to become an important Port Authority with the increase distributions from the North Baltimore Rail Hub and a decrease in leadership from the Toledo Port Authority which is still reeling from the demise of the Toledo Airport. Findlay, could quickly become a preferred hub for cargo distribution to 60% of the United States, which is within 1 day travel from our location. With the proper leadership and incentive, we could quickly develop the north and west side of Findlay into a vibrant and successful business center similar to Perrysburg’s Levis Commons.

    If we continue down this road of poor leadership and lack of business development, all the taxes in the world will not help our community. In fact, if you pressure the citizens and take more of their money through increased taxes, Findlay Citizens will do exactly what residents of Lucas county are doing…. They will speak with their feet and move out of the area! If you want to think more creatively about taxes, you should look at a regional tax, or sales tax which will level the equality of all area residents paying more. More and more of our citizens are moving out of Findlay and into the local townships. This shift of the tax base benefits the county schools but does little to support the infrastructure of Findlay which the area residents still use as they patronize our local businesses. A sales tax increase would spread the tax burden equally among all county residents instead of just Findlay citizens and employees. Yet, I would rather expand our employee and employer base before even talking about more taxes.

    • Jeff Detmer says:

      Frank

      Thanks for your comments. You raise some good points.

      As I stated above, we need to think about the quality of jobs that we bring to the Findlay Area. If we build only restaurants, retail and other businesses with low-skill, low-pay jobs, we could be dragging down the average contribution to our city income tax thereby making our financial issues worse.

      Regardless of any business development, we need to take a long, hard look at the sustainability of our current tax base.

      Jeff Detmer

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