Nearly all of a professional athlete's income is earned income, meaning it is subject to municipal earnings tax.  But the bulk of most wealthy people's income is some combination of rent, stock dividends, capital gains, etc., none of which are taxed by municipal earnings taxes. 

 

Most things people inherit aren't huge things. I inherited some farmland but I'm not hanging out with the Walmart guys.

 

Typical farmland typically does not generate much revenue for an absentee landlord, nor does it rise in value quickly since we have so much good farmland in the United States (unlike Japan, for example).  It's a totally different asset than a stock like Wal-Mart. 

 

Additionally, the stock that heirs inherit is often of a different class than common stock, meaning heirs are often guaranteed seats on the board and/or payment if the company goes bankrupt before holders of common stock.  For example the 80-odd living heirs to Henry Ford own 2.8% of the company, but hold nearly half of the seats on the board and so still exert a lot of control over its affairs.  In fact I read several years ago that a sale of common stock circa '07-'08 is what kept the company out of trouble during the crash, and the sale of that stock was motivated by some sort of ownership issue with the family, not some brilliant stroke of clairvoyance.

 

 

 

 

This thread is getting toxic.

 

Please make sure you're making rational, fact based arguments about the income tax, wealth, etc.

 

Thanks!

 

Typical farmland typically does not generate much revenue for an absentee landlord, nor does it rise in value quickly since we have so much good farmland in the United States (unlike Japan, for example).  It's a totally different asset than a stock like Wal-Mart. 

 

The average piece of farmland in central and mid-Ohio has much more profit potential than the avenge plot around Cincinnati, Appalachian Ohio or Kentucky, so you're kinda speaking from your local perspective. Water runs off of those lands very quickly or farmland in those areas sits in risky floodplains. Same thing with the land appreciation argument. Sure nobody wants to try to sell floodplain near Newtown, but farmland around Columbus can rise quickly due to all the warehouses that go up here and due to continuing growth in the metro. And the land is already flat. Flat land with little drainage problems goes for a premium.

 

But the other thing you can do is sharecrop rather than cash rent. When you cash rent the farmer takes all the risk rather than the landowner. That provides a steady stream of income, but has much lower profit potential because it is low risk.

Yes so much good farmland sits fallow in the eastern, southern, and Appalachian United States (including the Cincinnati area, which is technically Appalachian foothills) because we have so much great farmland in the Midwest.  The whole zone from Columbus west to Nebraska is an anomaly on Planet Earth and helps ensure the long-term stability of the United States since we have the potential to support and much larger domestic population.

If you live in the city and work in the city, you pay the tax.  If you live outside the city but work in the city, you pay the tax.  If you live in the city but work outside the city, you pay the tax.  The only way you don't pay the tax is if you live AND work outside the city.  If you live in one city but work in another, your payroll deducts and allocates the two city taxes proportionally.  You don't for example pay Blue Ash AND Cincinnati earnings tax. 

 

However, there are many small cities and chances are that you work in one of them and pay its earnings tax, even if you live in an unincorporated township.  And now even the unincorporated townships are levying earnings taxes.

 

Municipal earnings taxes only exist in about half of U.S. states.  In states that don't have them, that revenue is gathered through other taxes -- sales, property, gross receipts, etc.  And in some states, especially New York, city tax is part of your state tax return.

 

Where did you get that idea? First of all the city where you work will collect its earning tax regardless. If the city where you live has an earnings tax you will also pay that unless that city grants an exclusion based on how much you pay where you work. The granting of an exclusion has to be written into that city's tax code and usually requires a vote of the citizens to grant it. In a number of locations in Ohio you can pay both their full amount. I never heard of a split between the two cities. Commonly only the city where you work is required to withhold municipal earnings tax. Where you live you must file a tax return and pay the tax accordingly, which may require you to make quarterly payments.

 

And please identify where in Ohio a township can levy an earnings tax. I believe that is specifically prohibited by state law and is not a local option. The only exception is that state law provides for a school district to collect revenue via an earnings tax if the electorate so votes to enable it. But that is the school district, not the city or township and is in addition to any municipal earnings tax you may pay.

 

Also, people having a principle place of employment but whose actual job frequently takes them outside of the city can apply for an exclusion to the earnings tax on the time worked outside of the city. This typically applies to trades people whose actual work site is frequently outside of the city boundaries. But if the actual work site is in another city which has an earnings tax you theoretically must file a return and pay them. An employer is only required to perform withholding for the city where their principle place of business is located.

Here:

http://www.westchesteroh.org/finance.cfm

 

>Where did you get that idea? First of all the city where you work will collect its earning tax regardless. If the city where you live has an earnings tax you will also pay that unless that city grants an exclusion based on how much you pay where you work.

 

It's not that complicated:

http://www.cincinnati-oh.gov/finance/income-taxes/

 

So if you live in Cincinnati but work in Norwood, 2.0% is paid to Norwood and .1% is paid to Cincinnati. 

If you live in Norwood but work in Cincinnati, 2.1% is paid to Cincinnati and 0% is paid to Norwood. 

 

 

...

Additionally, the stock that heirs inherit is often of a different class than common stock, meaning heirs are often guaranteed seats on the board and/or payment if the company goes bankrupt before holders of common stock.  For example the 80-odd living heirs to Henry Ford own 2.8% of the company, but hold nearly half of the seats on the board and so still exert a lot of control over its affairs.  In fact I read several years ago that a sale of common stock circa '07-'08 is what kept the company out of trouble during the crash, and the sale of that stock was motivated by some sort of ownership issue with the family, not some brilliant stroke of clairvoyance.

 

That must have been why Bill Ford got to run Ford Motor Company for a decade. He didn't know what he was doing and he admitted it when he resigned.

Here is a description of Ford's unusual ownership structure:

http://beginnersinvest.about.com/od/stocksoptionswarrants/a/ford-dual-class-stock.htm

 

 

That multi-class stock stuff is something that's taught in entry-level accounting courses but most people forget because it's not super common. The main reason though is that it's rarely in the news since individual investors cannot own it -- which of course makes for bad TV if you do talk about it.

Preferred vs. common stock comes up a lot in the history of railroad and interurban railway financing.  Especially with the interurbans, the actual financiers of the project would get preferred stock and a seat on the board of directors.  All the farmers and other small-town investors usually got common stock as an added incentive to buying the mortgage bonds used to finance construction.  Since preferred stockholders have claims on liquidation proceeds if the company goes under, they got to soak up what was left after abandonment of operations while the common stockholders were left with useless paper. 

Yeah the whole financing of interurbans was rather flimsy, but their collapse wouldn't have been so precipitous if they had come along just 10 years earlier or the rise of the automobile and the depression had occurred 10 years later. 

 

The moral problem with all of that financing was that it preyed upon naive investors -- the farmers.  I shudder to think how many good  men were ruined by those and similar financial gimmicks.  I dunno what's worse -- hucksters presenting them as get rich quick schemes or as sound long-term investments.

That was SOP back then.

That was SOP back then.

 

And now, for basically anything advertised on daytime TV or targeted toward "seniors".

 

An interesting local story was the payout of Suspension Bridge stockholders in the 1930s when the company restructured.  By that time almost everyone who had bought stock back in the 1850s and 1860s was dead, and it took over a year for somebody at the suspension bridge company to write to all these post offices around the country, and even drive in person to country towns, trying to find the heirs to the stock.  I read the account very quickly so I don't remember the details as sharply as I usually do, but there was all that effort to find people who were often getting something like $200 in today's money. 

 

Also the Cincinnati Southern Railroad had to be built with public money because the mountainous terrain of Kentucky and Tennessee worked against the effort in two ways -- it was more expensive to build yet there were far fewer locals to buy stock, and those people who lived in the mountains tended to be very poor.  Also the City of Cincinnati was able to sell the bonds at a lower interest rate than could any private financier.  It has turned out to be one of the greatest investments any American city has ever made -- and is a big reason why Cincinnati's property and income taxes are relatively low today.  Total railroad lease and property tax revenue from railroads supports a quarter to a third of the city's capital budget. 

Let’s dust this thread off - good news for Ohio cities that are large employment centers and depend on local income tax:

 

Franklin County judge dismisses case that challenged cities’ rights to tax people who don’t live or work in town
 

https://www.cleveland.com/personalfinance/2021/04/franklin-county-judge-dismisses-case-that-challenged-cities-rights-to-tax-people-who-dont-live-or-work-in-town.html

 

There are open cases in other counties, and this decision will be appealed, but at least it’s a promising decision for city revenues. 

^ As someone who now lives in a township, I've been watching these cases very closely. I'm optimistic that the Hamilton County case might turn out differently. Between my wife and I, we're talking about thousands of dollars paid to jurisdictions that we have barely stepped foot in. Add that up for millions of Ohioans - there's a lot of money at play here.

 

I understood the original need for the bill that included this tax structure - the sudden change would have wreaked havoc on municipal finances. However, we are now a year into the pandemic and many people are still working from home. Some may never return to their workplace, and most will likely see some flexibility and split time between their homes and offices. It does not make sense for a worker to pay all of their income taxes to a jurisdiction whose services they never or only occasionally utilize. Maybe it did when the pandemic first hit - but it doesn't now. This portion of the "state of emergency" really needs to be revoked, at this point.

 

Additionally, with the recent passing of the federal stimulus bill, municipalities are set to receive massive windfalls from the federal government.  The City of Cincinnati, for example, will receive $290 million. The city was only facing a $25.6 million deficit for the next fiscal year. This money will more than make up for any short-term fallout that cities may face due to the loss of a portion of income tax. There's really enough money there to retroactively return taxes from 2020, as well.

This will all end naturally as soon as cases go down and the COVID-19 orders are lifted. Then those working from home can claim refunds like before.

 

The federal stimulus bill cannot be used for salaries. There may be ways to move money around, but income tax revenues are more flexible and can pay for basic services like fire and police (unlike the ARPA funds).

10 hours ago, Ram23 said:

The City of Cincinnati, for example, will receive $290 million. The city was only facing a $25.6 million deficit for the next fiscal year. This money will more than make up for any short-term fallout that cities may face due to the loss of a portion of income tax. There's really enough money there to retroactively return taxes from 2020, as well.

That may cover short-term effects, but wouldn't cover future expenses if employers massively shift to "work wherever you want, most of the time."  If those cases go the other way, the loss of income tax funds to Cincinnati could be massive, sudden, and not at all temporary. There is a lot of uncertainty, of course, but it could be devastating to the core cities in the 3Cs if they lose a lot of that non-resident worker income tax.

Edited April 29, 20214 yr by Foraker
corrected incomplete sentence

21 hours ago, Boomerang_Brian said:

Let’s dust this thread off - good news for Ohio cities that are large employment centers and depend on local income tax:

 

Franklin County judge dismisses case that challenged cities’ rights to tax people who don’t live or work in town
 

https://www.cleveland.com/personalfinance/2021/04/franklin-county-judge-dismisses-case-that-challenged-cities-rights-to-tax-people-who-dont-live-or-work-in-town.html

 

There are open cases in other counties, and this decision will be appealed, but at least it’s a promising decision for city revenues. 

This is certainly going to be appealed, Cincinnati has it worse because of the Kentucky and Indiana workers who cross state lines. They cant necessarily rely on this case, because that involves a Federal issue given that the workers are crossing state lines, generally, the law is not in the cities favor there. I tend to think the Franklin County case is a short term win before the rest of the dam breaks through.

^^The legislative act that permits municipalities to continue collecting income taxes for those working at home during the pandemic will end with the pandemic (30 days after health orders are lifted).

 

Therefore, sometime this summer or fall, those working from home could file for a refund if they are not going into the physical workplace. However, there will be revenue offsets, because the residents of cities that work from home and seek refunds would then have to pay their home jurisdiction. So cities may lose income from people working in offices, but gain income from those residents working from home in their community.  

3 minutes ago, ink said:

So cities may lose income from people working in offices, but gain income from those residents working from home in their community. 

The problem is that the largest cities (Cbus, Cincy, Cleveland, Toledo) have more people who travel into the core to work during hte day than the reverse. While there will be an offest, it will still be negative to the biggest cities.

There is now a bill in the House that would allow people who work from home to file for a tax return for all of 2021 instead of just the days after the state of emergency expires (though the ship seems to have sailed on retroactively applying this back to 2020). I'll watch this closely because I live in a township and work in Cincinnati.

 

https://www.cincinnati.com/story/news/2021/05/19/ohio-moves-change-pandemic-rules-municipal-income-tax/5163233001/

 

A law passed during the pandemic lets cities collect taxes as if workers commuted to their offices until 30 days after Ohio's state of emergency ends. Right now that would be Aug. 23.

 

Basically, HB 157 would let you claim a refund for every day you worked from home in 2021 and current law would let you start claiming those days in August.

 

 

 

^Wouldn't current law allow you to start claiming on July 2nd (30 days after health orders are lifted)? 

The State of Emergency might be on a different timetable than the health orders.

19 minutes ago, GCrites80s said:

The State of Emergency might be on a different timetable than the health orders.

 

Yeah it is somewhat confusing. The state health department orders are issued under a different power than the State of Emergency declaration. The health orders are set to be revoked on June 2nd, but the governor has not set a date to end the State of Emergency.

 

That said, the legislature recently passed a law requiring the State of Emergency to expire on July 23rd at the latest. DeWine vetoed it, but they overrode his veto. DeWine could move the end date up, but he cannot legally extend it. Any new declaration would not include any of the requirements (like the income tax one) that the last State of Emergency had since many of those were only possible with the cooperation of the legislature.