Deprived of the ability to do what they want, Hermitage School District Tax Study Commission members chose to do the minimum permissible.

The commission Monday recommended the school board put a referendum on the ballot asking voters to raise the earned income tax by one-half percent, bringing the total to 1 percent. The recommendation is not binding and the school board has until March to figure out what it wants to do.

Commission members said the options they had were really no options, and they would have preferred to recommend keeping the school tax structure as it is, reliant on real estate taxes. However, the state law that is mandating school boards to offer some real estate tax relief will not allow that.

“I’m sorry we’re limited in our recommendation abilities,” said Andrew Mudrinich.

The board recommended that this question be placed on the May ballot:

“Do you favor imposing an additional 0.5 percent earned income tax? The revenue generated from the increased tax rate will be used to reduce taxes on qualified residential properties by up to approximately $330 (up to approximately $200 in the first year). The current earned income tax rate is 0.5 percent.”

Officials must offer to voters a real estate tax exclusion of up to 25 percent of the median assessed value. An exclusion is not a rebate but a reduction in property taxes and will be reflected on the tax card.

The $330 number is an estimate and officials will have a better idea on it early next year, said Business Manager Monique Barber. The first-year figure is lower because it will have a partial year of tax collections. All qualifying homesteads and farmsteads — owner-occupied homes and farms — will get the same amount of exclusion, no matter what their properties are worth.

The median assessed homestead/farmstead value in the city is $23,250, which currently carries a property tax bill of $1,325, and the estimated tax decrease would bring the tax bill down to $995.

The median wage in the city is $39,454, and a 100 percent hike in EIT would take the EIT tax from $197 to $394.

The school board has the option of offering to voters boosting the earned income tax, adding a personal income tax or converting the EIT to a PIT. The EIT is levied on wages, salaries, tips and self-employment income, and a PIT covers those forms of income but also taxes interest, investment, distribution, rental and “S”-Corp. income.

Commission members said they ruled out a PIT early because they feared the administrative cost of collecting it would be greater than the benefit, and that it would hurt the taxpayers who would be helped by the property tax reduction.

Commission members were hesitant to increase the EIT because Hermitage’s total EIT — 1.75 percent for the city and 0.5 percent for the schools — is the 12th highest in the state. Boosting the EIT makes the city less attractive to businesses and individuals considering moving there. “It is clearly not in the best interest of the city,” said Raymond Slovesko, the school board’s member on the commission.

They decided to recommend a 0.5-percent EIT hike to meet the minimum requirements under state law.

The problem with any recommendation is the amount of property tax savings by residents is relatively small, while households with good incomes stand to have to pay a lot more taxes because of the higher EIT, said commission member Diane Ward.

Recommended for you