How To Win an Income Tax Increase

There is much good information in GOVERNING magazine's article from 10/21/09, "How To Win An Income Tax Hike." I encourage everyone to read it through.  It explains a lot about Ohio restrictions related to how municipalities can raise money, what is and isn't taxable and the range of options often considered and implemented when we face budget deficits.  The must-read portions:

What kind of groundwork did you lay to ask voters to increase their taxes?

A year and a half ago [early in 2008], we had organized an economic advisory council that was charged with critically examining the city's finances to ascertain areas where we could improve, areas where we could make some changes in terms of potential cost savings. The council did a very thorough examination of our costs, revenue, expenses and savings.

Was this in anticipation of the problems you would be facing today?

I knew something was coming. I didn't anticipate the national recession. No one did. But the truth is, at the local level, we've been in recession a long time. Recessions in cities in the Midwest began years ago. The rest of the country caught up when the bottom fell out.

What advice do you have for others who want to try something like this?

I learned six lessons from this:

First, You have to have total and complete transparency — of your books, your finances. We went out in communities and talked about our strengths and weaknesses in an honest and open way.

Two: There must be a reform plan. You must be able to look in the mirror and determine what is it you can do better as a city, and then do it. And it's hard to admit that you're not doing everything perfectly.

Three: When you talk about the pain of the cuts in city government as they impact citizens, you have to take some cuts yourself. I cut my salary and the salary of everybody that I had control over. We had to show our citizens that this is the real deal.

Fourth: Building partnerships and coalitions was key.

Fifth: You have to have a strategy to communicate your ideas in a clear fashion to each stakeholder. You have to have a focused message.

Sixth: You have to educate the public about what the real deal is. Here's a prime example: We set aside 25 percent of every dollar we get in from the income tax into a special fund. The set-aside is used to retire bonds that are issued to build infrastructure. So some opponents of the tax said, "Take that set-aside and apply it toward the general fund." We had to educate the public and communicate with them in a transparent way that if we did that, we would default on bonds that had been issued, and that's a terrible financial practice. We're a triple-AAA credit-rated city, and we would be guaranteed to lose that if we eliminated that set-aside.

When I talk about this around the country — how the public adopted a self-imposed 0.5 percent income-tax increase — people are floored. They wonder how we did it at a time like this. I can tell you this. I don't want to do it again.

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