Why does Cleveland need a hike in its local income tax?
Answer: Decades of rare generosity to wealth. Call it Give Aways. All ways.
Cleveland has mortgaged its future.
Now it wants workers to pay the bills again.
Back in the 1950s downtown property owners, among others, got a big tax break when state law was changed to make the taxing rate on property—commercial, industrial or home—the same. Previously, homes were tax on values lower than commercial. Commercial properties—places of profit—went from being valued for tax purposes at 49 percent to 35 percent, same as one’s home. So commercial property got a never-ending 14 percent break.
I wrote about this a while back:
In that historic Ohio Supreme Court case—known as the Park Investment case—in the late 1950s, the whole system of taxing property was changed significantly. Homeowners pay the price. The change helped commercial and industrial properties to shift more of the burden of taxation from business to homeowners.
The Ohio Supreme Court ruled for (David) Swetland that property should not be taxed at different rates. Commercial and industrial properties—because they involved profit—had been paying taxes at a higher level than property used to house people. Taxes now are paid on 35 percent of the market value as set by Cuyahoga County.
The Park Investment case tipped taxes from real estate interests to the owners of homes.
The 1919 building had been an office building but converted to condos in 2009. I’m sure it is home now to some wealthy tenants since the rate advertised at that time went from $269,900 to $359,000 a unit and a penthouse at $700,000. Pricey.
But rate reduction in the 50s wasn’t good enough. By the 1970s it went to abatement of property taxes. A Squire-Sander written state law.
Park Building tenants got tax abatements of 12-years, though on a sliding scale from 75 percent for the first five years, 50 percent the next five years and 25 for the final two.
This has been an added break since the late 1970s when Ralph Perk started tax abatement at National City Bank building at E. 9th & Euclid. (The building, setback from the street, was poorly structured without space for retail, damaging Euclid Avenue’s prospects for retail by its setback). The bank had net profits of $220 million the previous decade and $35 million the previous year and paid $100 million in dividends. Not in poverty.
Perk also gave Sohio tax abatements worth $21 million in 1977 before leaving office. At that time the Sohio building, which ended up on Public Square, was slated to be behind Tower City. The PD editors helped keep public matters private by meeting with Sohio executives at the Union Club with Publisher Tom Vail. We didn’t see much coverage of abatement for the giant oil company in the newspaper and TV news, of course, was absent as usual. Protecting power from pesky citizens of the time.
Eventually Sohio built on Public Square and got no abatement. I hope I may have had something to do with this. Council President George Forbes foolishly called a full Council
breakfast meeting at a hotel to discuss the project. Privately. When I and Gary Clark of the Plain Dealer refused to leave the meeting as all other media people did, Forbes, angered by something I said, heaved me out the door. His problem: that’s where the TV cameras and photographers were watching. A huge photo appeared in the Cleveland Press that afternoon, and the event, less violent than it seemed, was news on TV.
One station warned viewers that they might want to remove children from the room. It was 1981. Shocking.
Sohio didn’t get abatement. I hadn’t thought about it but now wonder whether Forbes and especially nervous Nelly Mayor George Voinovich backed away fearing bad publicity. Sohio, drowning in North Slope oil, also had earned $1 billion in the previous decade. And they wanted a tax break? Of course.
Years later I had the urge to find out what the decision meant in dollars for Sohio, which became the BP Building, to NOT get abatement. In the previous five years examined the company paid $17,750,828 in taxes. It was worth my torn coat. Some $10 million went to the schools and $7 million to the County and City. In total if Sohio had taken the original abatement package behind Tower City it would have ESCAPED $28.3 million in property taxes.
In contrast National City Bank escaped $10,630,245 in property taxes. It took 10 years before the taxes paid on the bank exceeded the amount exempted.
This was only the tip of gifts of the Voinovich-Forbes city hall during the 1980s. They awarded 100 percent tax abatements for 20 years for Key Tower, the Marriot hotel and the Ritz-Carlton. They even added to the abatements with 20-year urban action loans for Dick Jacobs and Forest City—interest free and not a penny repayable for 20 years. Such charity to wealthy.
Money was gushing out of Cleveland City Hall.
This, of course, is just the tip of the pile of money the city and county gave away.
We know that they have spent and/or committed likely up to $2 billion to downtown sports palaces, a convention center, a medical mart and a new publicly and financed fancy hotel, which David Cay Johnston—a NY Times Pulitzer prize winner and educator—twitted in the Daily Beast that Cleveland built a commie hotel (public dollars) to provide the GOP National Conventioneers plush beds and more. Even the nightly Daily Show got interested after Cay Johnston’s tease, a County official told me. They wanted the county to send someone to New York to appear on the show to discuss the hotel. The contact, a big Daily Show fan, too, thought better after a momentary desire, knowing he would be the butt of jokes.
The truth is mayor after mayor—Voinovich, Michael White, Frank Jackson—and the compliant Councils—through the years have done is two-fold. They have created taxes—sin, (45 year tax at this point), arts (20 years with new extension) and the highest (8%) sales tax in Ohio (40-year duration)—that pull in huge amounts of revenue and they have diverted other taxes—from parking revenues, tax abatements, admission taxes—in the hundreds of millions of dollars and the result—they don’t have enough revenue to do the essential things that make a city work.
So they go back to the well with another regressive payroll tax, a hike of a half percent to two-and a half—and expect everyone to understand—they need the money or can’t keep the city doing the basic things they were elected to do. What a shame!
Jackson and Council say, YOU MUST BE RESPONSIBLE AND PASS THIS TAX.
Why? Because they have been irresponsible repeatedly and can’t do the basic job they were elected to do.
But to raise the minimum wage, the politicians—even those who support it—are told NO can’t do, and they obey. Slink away.
Obedient politicians are the scourge of our Inequality Society.
Where are we headed in this big Democratic city with all Democratic governance?
To a sales tax on food. What’s left to tax? Wealth? Not going to do that.
No, we have to help in poverty neighborhoods with a tax on basic stuff—your potatoes, fruit, and cereal. All of it. That’s next.