Former City Council President Rob Ludeman has proposed an income tax credit for first-time home buyers in Toledo, with a goal of stimulating home sales and generating income for the City of Toledo.

“One reason the city is in a difficult financial situation is that its payroll income tax does not come close to generating enough revenue to operate the city in the black,” Ludeman stated in his proposal.  He is running for an at-large seat on council.

Less than 60 percent of city residents actually pay income tax due to high unemployment, disability and retirement, according to conversations Ludeman said he has had with various city officials.

The federal government has a real estate stimulus, offering first-time home buyers as much as $8,000 with the purchase of a house.

Ludeman proposes the City of Toledo create its own real estate stimulus program by abating a portion of the city income tax to buyers purchasing property in the city for the first time as their primary residence. A first-time buyer would be one who has not owned a home in Toledo for three years, according to his proposal.

People purchasing a home in Toledo for the first time would be granted a reduction from the current payroll income tax of 2.25 percent to 1.5 percent. Saving three quarters of a percent would stimulate buyers to purchase homes and live in Toledo, Ludeman said.

“I’m taking a different approach with a proposal to raise revenues by decreasing taxes. If we can cut taxes and increase revenues for the city, we should consider it,” Ludeman said.

There are about 2,000 houses for sale in Toledo, according to the Multiple Listing Service. About 85 percent of those homes are vacant due to relocation for job transfer, foreclosure, estate or guardianship, retirement or moving to assisted living facilities, according to research Ludeman said he conducted.

Since those vacant houses are generating no income tax at this time, bringing buyers and new homeowners to Toledo would generate tax revenue from the 1.5 percent still paid by those buyers under his plan, Ludeman said.

His proposal suggests abatement for five years, the typical length of time a first-time homeowner lives in a property. If the next home purchase would be in Toledo, the homeowner could continue the income tax abatement for an additional five years.

“Anything we can do to strengthen our housing stock is something to consider,” said George Sarantou, chairman of city council’s finance committee. “I will certainly take a very thorough look at his proposal.”

Ludeman’s proposal offered an example of a vacant home purchased for $80,000 by first-time buyers with a combined income of $60,000. The tax revenue for the city would be $900 annually for five years, generating $4,500 in revenue with tax savings of $450 per year or $2,250 over five years for the homeowner.

If only 50 percent of the vacant houses were purchased and occupied using the previous example, $900 from 1,000 homeowners would bring $900,000 in additional tax revenue annually to the City of Toledo, according to Ludeman’s plan.

The tax savings of $450 for 1,000 homeowners would provide $450,000 of extra income to be saved, spent or used to remodel the house. The $8,000 federal stimulus for actual first-time buyers would generate additional buying power in Toledo.

Ludeman previously served on city council for 14 years with the last 18 months as its president. He sells real estate for The Danberry Company in Toledo.

This entry was posted on Friday, July 3rd, 2009 at 12:00 am and is filed under Toledo Business Link.
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