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Tax Burden

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    Posted: Oct 24 2011 at 3:50pm
Saw this article on the Cincinnati Enquirer website and thought some would find interest:

School tax burdens not always equitable

Enquirer measures how much taxpayers sacrifice

3:00 AM, Oct. 24, 2011  |  

Tom Ramsey, of Middletown, is a real-estate agent who started a chess club at his son's school to expand educational offerings. He pays 4 percent of his income of $29,000 a year on school taxes. / The Enquirer/Liz Dufour
Written by
Denise Smith Amos

  • Filed Under

Measuring tax burden

There are many ways to measure the relative burden taxes have on individuals' pocketbooks and wallets. This story looked at two measures that focus on incomes.

Sacrifice percentage

• What it does: It compares the average annual school taxes paid per $100,000 home for each school district to the average taxpayer's income, as reported to the state of Ohio, using the most recent information available. Measuring taxes per $100,000 property valuation enables comparisons across districts.

• Disadvantages: It's an inexact measurement. It relies on a tax figure on a $100,000 home and compares that to the average taxpayers' annual income. In more affluent districts, where most homes are worth more than $100,000, the percentage could understate the taxes paid. In less affluent districts, where few homes are worth $100,000 or more, the percentage could overstate the tax burden.

Local tax effort index

• What it does: It compares local tax revenues collected by each school district with taxpayers' annual incomes in each district. It makes it possible to compare taxpayers' relative school tax burden from district to district and to a state average.

• Disadvantages: The Ohio Department of Education, which compiles the index, said it "suffers from inherent complexities in data collection, manipulation and availability."

Your take

Tell us the name of your district and whether you feel you are paying too much or too little in local school taxes. Email damos@enquirer.com


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Second in a three-part series examining school taxes in Southwest Ohio.

Middletown taxpayers dig the deepest to pay their school taxes, an Enquirer analysis of Greater Cincinnati's 49 school districts shows.

Data: School Tax Burden, by District, measures how much taxpayers sacrifice
Data: School Tax Chart shows how much each district collects – and how much each homeowner pays

Local school taxes on a $100,000 home in Middletown are $1,458 a year. That amounts to 3.72 percent of the average annual income of Middletown residents - $37,619 a year - far below the state average income of $61,453, or Cincinnati's average of $51,520.

School taxes are a sizable sacrifice in the Butler County district, where 70 percent of children qualify for free and reduced-price lunches and where unemployment hovers around 9 percent.

Tom Ramsey, a real-estate agent with two children in Middletown schools, knows his district is struggling.

He pays about 4 percent of the nearly $29,000 he earns each year on school taxes. To help expand educational offerings, he coaches 13 kids in a school chess club.

"I'm not a person who complains about taxes," he said. "It's part of my duty as a citizen - as long as it comes out of my pocket in a fair and equitable way."

Some observers question the fairness of taxing low-income residents so much for schools, especially now, as 11 Greater Cincinnati districts (not Middletown) have school tax issues on the Nov. 8 ballot and state leaders try to revamp Ohio's school funding system.

"School funding is a mess," said Marcia Andrew, Middletown's board president. "It needs to be more equitable."

State officials over the years have changed the funding formula to make it more equitable, but the state Supreme Court has said it still relies too heavily on property taxes.

Stan Heffner, Ohio's superintendent of schools, said he is optimistic that a new funding formula will withstand legal challenges and expects that districts with higher concentrations of poverty or students with special needs would receive more state aid.

"But the state is so diverse ... to try to get it all equalized has become a very complex process," he said.

The Enquirer analysis compares school tax-rate data with average income levels for each of 49 public-school districts in Butler, Clermont, Hamilton and Warren counties.

While some taxpayers in high-tax districts pay a lot for public schools, others who earn less pay a bigger share of their income for schools.

Ohio provides basic aid to school districts using a formula that considers property valuations. Districts with high property values generally receive less from the state; districts with lower property values receive more.

But Middletown, like Cincinnati, is considered a property-wealthy district because of the presence of industries such as AK Steel and SunCoke Energy Inc., even though most of its residents are not wealthy.

The amount of school tax that people with lower incomes should shoulder is a key question for state officials trying to revise Ohio's school funding formula, said Andrew Benson, vice president of KnowledgeWorks Ohio in Cincinnati.

"If some school districts have plenty of money - way beyond what other districts have - they probably don't need the state tax dollars (as much)," he said.

Ohio has its own measure of the tax burden of local school taxes. Called the Local Tax Effort Index, it compares the school taxes generated in each district with taxpayer incomes in each district and throughout the state.

A Tax Effort Index substantially above 1 means a district's taxpayers are paying a bigger share of school taxes compared to taxpayers around the state.

But an index below 1 means a district's local tax effort is less than the statewide average. That's the case in 27 of the region's 49 school districts, the index shows, including Forest Hills, Oak Hills and Little Miami, which has a proposed tax increase on the Nov. 8 ballot.

Indian Hill has the lowest Local Tax Effort Index in the state, at 0.36.

Indian Hill's taxpayers contribute $793 in school taxes per $100,000 in home value. That amounts to 0.26 percent of their average taxable income of $278,432.

But most Indian Hill residents own homes worth many times the $100,000 amount and pay more than the analysis indicates, said Fred Sanborn, a resident and leader of the anti-tax Committee for Responsible School Spending. Indian Hill is a relatively small district (2,100 students), he said, and doesn't need more tax money.

Mary Siegel, an Indian Hill homeowner unhappy about the $8,000 or so she pays in annual school taxes, doesn't believe district residents should pay more taxes.

"Do we deserve to get taxed more because we can afford to pay a little more for schools, or are schools wasting money?" she asked. "You could spend $15,000 per student and not have a better education than somebody who spends $10,000 per student."

Indian Hill district officials disagree.

Their schools' small class sizes, wealth of the arts, and elementary and middle school Spanish, French and Latin classes all "develop each student's maximum potential and prepare students to successfully compete on a global stage," said Martha Stephen, district spokeswoman.

Indian Hill out-scored all districts on its performance index and earned an Excellent with Distinction designation on the Ohio report card, the highest ranking.

Even so, district officials predict a 14 percent decline in local revenues next year from its $31 million budget due to lower property tax values. Also, the district lost $940,000 this year in state funding and reimbursements, Stephen said.

State officials devising a new school funding formula should consider family incomes and adjust their state funding lower for districts that need the least financial help, Benson said.

Barbara Shaner, president of the Education Tax Policy Institute in Columbus, agreed that taxpayers' ability to pay should be considered in state deliberations about education funding, but, she said, "anytime you change a system, there's the potential for winners and losers, in terms of what people might have to pay."

Benson said the debate and discussions are worth the controversy. It's good for communities to decide on educational priorities.

"It's not throwing away money to invest in your schools and in your kids; it's all good," Benson said. "But it's all relative - how much you spend, how you spend it and what you spend it on."

Coming next: How much districts spend on students

I apologize for the ineptitude of my cut and paste efforts.

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