What Is Good For The Goose

Discussed previously (Because That’s Where The Money Is, 4-2-14), Newark Ohio’s city government finds itself between a rock and a hard place. Long neglected streets are badly in need of resurfacing and repair. The administration claims there is no money, no fat to cut to produce any. Now the city council has decided to investigate whether to pursue funding through a property tax levy or an income tax increase. Either would go before the city’s voters for approval in the fall (after the 2014 paving season, but well before completion of the oxymoronic square circles). At its 4-14-14 council meeting Councilperson Doug Marmie joined the likes of Kim Kardashian with a pre-emptive selfie. He is quoted as going on the record saying “I won’t be supporting any kind of tax increase.” So much for selfies, they certainly don’t do much to solve the problem of getting the roads fixed (but they sure look great on social media. Score one Marmie!). Property tax levy or income tax increase, how to decide? All the tax credits given to jobs creators have increased the coffers NOT, either because most have been produced outside Newark or those, if any, within Newark have not offset the credits. Either way, the subsidies involved both property and income breaks, no milk from that cow (so much for relying on the promises of the jobs creators); which leaves taxing what is not already subsidized, credited or abated. Perhaps this may help our not-to-be-envied Councilpersons:

“For rent and utilities to be considered affordable, they are supposed to take up no more than 30 percent of a household’s income. But that goal is increasingly unattainable for middle-income families as a tightening market pushes up rents ever faster, outrunning modest rises in pay. The strain is not limited to the usual high-cost cities like New York and San Francisco. An analysis for The New York Times by Zillow, the real estate website, found 90 cities where the median rent — not including utilities — was more than 30 percent of the median gross income.” This from a New York Times report (4-14-14) by Shaila Dewan entitled “In many cities, rent grows out of reach”. Further on Dewan writes “For many middle- and lower-income people, high rents choke spending on other goods and services, impeding the economic recovery. Low-income families that spend more than half their income on housing spend about a third less on food, 50 percent less on clothing, and 80 percent less on medical care compared with low-income families with affordable rents, according to a new report by the National Low Income Housing Coalition. And renters amass less wealth, even non-housing wealth, than homeowners do.” The article concludes with “In many markets, buying a home is considerably cheaper than renting, and Miami is no exception. But many people are shut out of buying because their income is too low, they don’t qualify for a mortgage or they are burdened by other debt. In 2008, a quarter of rental applicants were still paying off student loans, according to CoreLogic, but as of last fall half of them were doing so. Steve Gunn, 25, the marketing director for a Miami real estate brokerage firm, said he could certainly afford an apartment on his salary of $52,500 — if he weren’t paying more than $800 a month in student loan debt. Instead, he commutes 90 minutes to work. From his mother’s house.”

Previous blog posts in the past year have extensively considered the place of rentals in Newark’s business portfolio (one of the largest, if not the largest business). The last census listed 43% of Newark residences as non-owner occupant. Spelled out graphically, the property owners of 43% of Newark’s residences do not live there. Councilperson Marmie’s self-aggrandizing selfie aside, any deliberation between the pros and cons of income or property tax must take this into account (and not who will be motivated to or suppressed from voting). An income tax increase will leave even less to work with for 43% of the households, for sure, for sure (in terms of the consumer spending which drives Newark’s economy no different than any other city in the State). That does not bode well for a local economy. A property tax increase will meet howls of disapproval from 57% of Newark’s residential property owners, for sure, for sure. It will also bring out the inevitable cliché of “the landlords will only pass on the cost to the tenants.” Analysis finds this disingenuous in many ways. For the most part Newark residents must commute to jobs outside the city. Rents, as the NY Times article points out, follow regional trends/competition. Raising rents carte blanche (because it’s Newark) may make other areas, within the price range, much more attractive. But there is an even more compelling, dare I say, perverse logic that renders the “landlord will only pass the cost on to tenants” cliché even more disingenuous. The various “jobs creator” proponents of JEDZ and JEDD continuously tout this logic as the fundamental basis for these tax structures. The logic is that the majority of workers who will pay the tax (by working within the district) do not reside there. A property tax increase would affect 43% of the residential properties in Newark where those generating income from the taxed property asset also do not reside there. If it’s good for the likes of JobsOhio, the Chamber of Commerce and other jobs creators, it ought to be good for the City of Newark too.

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