CINCINNATI — For the first time in its history, Cincinnati Public Schools is asking voters to consider an earned income tax rather than a traditional property tax levy, marking a significant shift in how the district plans to fund its operations.
The CPS Board of Education voted Monday to place a 0.75% earned income tax levy on the November ballot, saying the proposal would provide a more sustainable revenue source as the district grapples with rising costs and declining state support.
If approved by voters, the levy is expected to generate about $74 million annually, with revenue projected to grow by up to $2 million annually as residents' wages increase, according to district treasurer Mike Gustin.
The measure comes just weeks after the district approved more than 100 personnel cuts to help address a projected $58.6 million budget deficit.
How an earned income tax differs from a property tax
Unlike the property tax levies voters are accustomed to seeing on school ballots, an earned income tax is based on residents' wages and salaries rather than the value of their homes.
WATCH: How would Cincinnati Public Schools' proposed earned income tax levy work?
The proposed levy would apply only to people who live within the Cincinnati Public Schools district, regardless of where they work. Someone who earns $100,000 annually would pay about $750 a year under the proposed rate.
The tax would not apply to retirement income, Social Security benefits or investment income.
Darrin Wilson, an associate professor of public administration at Northern Kentucky University, said that distinction is one of the proposal's defining characteristics.
"It really is shifting the tax burden away from retirees and property owners and back toward folks who are working but live in the city of Cincinnati," Wilson said.
Wilson said many people are already familiar with Cincinnati's municipal income tax, but school income taxes work differently.
Municipal income taxes are generally based on where a person works. School district income taxes, however, are based on where a person lives.
That means a Cincinnati resident who works in Mason or Northern Kentucky would still pay the school income tax if the levy passes. Conversely, someone who works in Cincinnati but lives outside the CPS district would not.
Ohio law caps school district earned income tax rates at 2%. Cincinnati Public Schools' proposed 0.75% rate falls well below that limit.
Why CPS is pursuing an income tax
District leaders considered asking voters to renew a traditional property tax levy but ultimately opted for an earned income tax instead.
During Monday's meeting, some board members expressed concern about placing additional financial pressure on homeowners, particularly seniors and others living on fixed incomes whose property taxes have climbed alongside rising home values.
Wilson said school districts across Ohio are increasingly looking at earned income taxes for two primary reasons.
The first is politics.
"The number one voting block in local elections is retirees as well as property owners," Wilson said. "If you're a property owner or you're a retiree and you're being asked to pay a property tax, you're probably less likely to do so."
The second reason is financial.
School districts have historically relied on property taxes and state aid for funding. Wilson said that state funding has become less dependable in recent years, prompting districts to diversify their revenue streams.
"State funding has decreased, and that's caused a lot of school districts, including CPS, a lot of headaches," Wilson said.
The district also faces another unique challenge.
Much of Cincinnati's recent development has received property tax abatements, limiting the amount of new property tax revenue flowing to CPS despite continued investment throughout the city.
"Tax credits do have an impact in the amount of revenue that school districts, specifically CPS, can receive from property taxes," Wilson said.
For and against
Northside resident Kyle Blake said he is open to paying more if the district can demonstrate the money is being spent responsibly.
"As long as I know kind of where the money's going, it's going to the right places, and everything's distributed properly, I think that would be a good thing," Blake said.
Blake also said he hopes the new approach succeeds after years of school districts struggling to pass levies.
"I hope so," he said. "I think Cincinnati struggled with that ... I think we could use a little more money for that."
For opponents, the concern isn't necessarily how schools are funded but whether taxpayers should be asked to contribute more at a time when many households are already stretched by inflation and higher costs for groceries, fuel and other necessities.
Wilson said an earned income tax directly reduces workers' disposable income because it is based on wages rather than property ownership.
"I think for a lot of folks ... they don't necessarily see the direct benefit to their own household," Wilson said, noting many city residents don't have children enrolled in Cincinnati Public Schools. "There's a lot of personal factors that people are going to have to consider, including things like inflation and the cost of living right now."
The proposal has already drawn organized political opposition.
In a statement released after the school board's vote, Hamilton County Republican Party Chairman Josh Gerth said the party will oppose the levy, arguing Cincinnati Public Schools should focus on improving student outcomes before asking taxpayers for additional funding.
"The decision by Cincinnati Public Schools to place an income tax increase on the ballot is offensive," Gerth said in the statement. "CPS isn’t meeting state standards, has an outrageous absenteeism rate, and is generally failing to do its job of educating our kids. Cincinnati’s children and families deserve better. There are a lot of problems in the city’s schools - the size of their budget is certainly not one of them."
Gerth concluded his statement by calling the proposal irresponsible and reckless.
A growing trend across Ohio
CPS is far from alone in considering an earned income tax.
The number of income tax levies proposed by Ohio school districts has increased dramatically in recent years, according to the Ohio School Boards Association.
Several districts in southwest Ohio, including Mount Healthy and North College Hill, asked voters to approve income taxes during this year's May primary.
Still, success is far from guaranteed.
There were 32 school income tax issues on Ohio ballots during the May election. Twenty-four failed.
Wilson said he believes that history means Cincinnati Public Schools faces an education challenge before Election Day.
"I think voters are going to have to get educated on what the earned income tax is," he said. "Historically, most school districts are solely based off of property taxes."
Wilson noted that while voters often associate property taxes with maintaining strong schools and preserving home values, many have less familiarity with income taxes as a way to fund education.
Whether that messaging resonates with voters could determine whether Cincinnati Public Schools secures its first new revenue source of this kind when ballots are cast in November.
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