Understanding CPS’s Proposed Earned Income Tax Levy

Cincinnati Public Schools is exploring a historic shift in how it raises local revenue by proposing the district’s first-ever earned income tax levy. Unlike traditional property taxes, this measure targets active wages to fund public education while shielding retirees and fixed-income residents. As school board members prepare to put this decision before voters, local families and property owners need to understand how this tax model works.

Why CPS is Considering an Earned Income Tax

For decades, Cincinnati Public Schools (CPS) has relied heavily on property tax levies to secure local funding. However, rising property valuations have put an unprecedented financial strain on homeowners, particularly seniors living on fixed retirement incomes. By pivoting toward an earned income tax, the school board hopes to establish a more equitable funding stream that aligns with residents’ actual earnings rather than their unrealized property wealth.

This proposal comes at a critical time as federal pandemic relief funds wind down and operational costs continue to rise across the district’s schools. District leadership argues that diversifying revenue sources is necessary to protect classroom programs, retain high-quality teachers, and maintain aging school facilities without forcing long-term residents out of their homes due to escalating property tax bills.

Earned Income Tax vs. Traditional Property Tax

An earned income tax is fundamentally different from both traditional property taxes and standard municipal income taxes. It only applies to specific types of compensation, meaning a significant portion of the community’s wealth—particularly retirement benefits and investment portfolios—remains untouched. Under Ohio law, school districts can choose between a “traditional” income tax and an “earned” income tax. CPS is pursuing the earned income model specifically because it targets active earners rather than residents who are retired.

What is Taxed and What is Exempt?

For Cincinnati residents, understanding what qualifies as “earned income” is essential to calculating their potential tax liability. Wages, salaries, tips, and self-employment earnings are fully taxable under this plan. Conversely, passive income streams are completely exempt. This means seniors relying on Social Security or pensions will not pay a dime under this specific levy model.

The Economic Impact on Cincinnati Households

The introduction of an earned income tax would create different financial realities depending on your household’s stage of life. For young professionals and working-class families, this levy would mean a direct deduction from their paychecks, reducing monthly take-home pay. For retirees who own homes, the levy represents a major relief, as it avoids the compounding costs associated with traditional property tax increases that have impacted Hamilton County in recent years.

Local business owners and self-employed individuals will also need to adjust. Because self-employment income is classified as earned income, freelancers and local entrepreneurs will be responsible for reporting and paying this tax annually. Opponents of the measure worry it could make the city less competitive for working professionals, while supporters emphasize that strong schools ultimately protect property values for everyone.

Next Steps for Voters and the School Board

Before this levy can appear on a local ballot, the Cincinnati Public Schools Board of Education must pass formal resolutions to determine the exact percentage of the proposed tax and submit the measure to the Hamilton County Board of Elections. Once approved for the ballot, Cincinnati voters will have the final say during the upcoming election cycle.

In the coming months, the district plans to host community forums and informational sessions across Cincinnati neighborhoods. These meetings will provide residents with calculators and direct resources to estimate their individual tax impacts before casting their votes.

Frequently Asked Questions

• How does this tax affect retired Cincinnati residents?
  Retirees are largely exempt from this tax. Social Security benefits, public and private pensions, annuities, and IRA distributions do not qualify as earned income and will not be taxed under this levy.
• Will renters have to pay the earned income tax?
  Yes. Any renter who earns a wage, salary, or self-employment income within the school district boundaries will be subject to the tax, regardless of whether they own property.
• How is this tax collected?
  If approved, the tax is administered by the Ohio Department of Taxation. Employers will typically deduct the tax directly from employees’ paychecks through payroll withholding, similar to state and municipal income taxes.
• Can the school district use these funds for any purpose?
  The funds generated by this levy are designated for the district’s general operating fund, which covers everyday expenses like teacher salaries, classroom materials, utilities, and student transportation.

To prepare for this potential change, Cincinnati residents should review their current sources of income, calculate how an earned income tax would impact their household budget compared to a property tax hike, and participate in upcoming school board forums to voice their opinions.

Cincinnati Schools Propose Earned Income Tax Levy