City Manager calls tax credit reduction an unvoted increase

By Frank Lewis

April 15, 2014

By Frank Lewis


Portsmouth City Manager Derek Allen referred to the proposed reduction of the city income tax credit as - “an unvoted tax increase” Monday night at the Portsmouth City Council meeting.

As it stands now, if you live in Portsmouth and pay city income tax in another city where you work, you are given credit for those taxes on your Portsmouth income tax bill. That could be reduced to 50 percent credit if Council takes action to attempt to produce more revenue.

Allen was careful to give both the positives and negatives of the income tax credit reduction. The first negative point is that it is an actual tax increase that citizens can’t vote on. And there was a second downside.

“It’s somewhat unfair in the fact that, because of the circumstances of where I live and where I work, my taxes could go up, whereas my neighbor’s may not,” Allen told Council. “If I live here and I work in another community, where you work gets paid first, and where you live gets second,” Allen said. “I live here and I go to work somewhere else, they take my income tax out, but I live here and I use city services and whatever city services are paid through city income tax, I’m using the service but I’m not paying. However, if this happens to me, I’m feeling like I’m being double taxed, paying the tax in community B and I’m still paying the tax in Portsmouth.”

Allen said a lot of communities have begun to reduce the credit. He gave as an example the city of Athens, Ohio.

“In Athens the rate is 1.65 percent. If you live there and work somewhere else, they give you one percent credit,” Allen said. “You pay .65 if you live there. And you see a lot of them are reduced credits and Nelsonville is reducing their credit even further.”

Allen said he is not sure the city’s tax administrator is able to calculate how much revenue such a move would generate.

“I would think that in a computerized system we should be able to find out who has filed credits on their income tax and then do a calculation of how much it would generate,” Allen said. “If this was Columbus, Ohio; if we were Dayton, Ohio or Cincinnati, there’s probably a huge revenue stream there because they have a lot of people who have the ability to live in one suburb and work in another.

Allen continued to explain to Council he is simply looking at every option to give them choices and hopefully find revenue to help with bringing down the city’s budget deficit.

“I’m throwing this out there because we need to look at every possible avenue to get us out of the financial problem that we’re in,” Allen said. “Mandatory filing (another option), I don’t think you’re going to hear a lot of people complain about. I would anticipate that people are going to chew your ears on this one.”

Though Third Ward Councilman Kevin E. Johnson was the lone member to openly oppose the reduction of credit, in the end Council chose the “take no action” option and opted to have City Auditor Trent Williams go back and find out how many residents live in the city and work in another area where there is also an income tax. So the legislation most likely will be brought up again for consideration.

Frank Lewis can be reached at 740-353-3101, Ext. 252, or on Twitter @FrankLewispdt.