SHELBY — Income tax rates are officially decreasing for Shelby residents who work outside city limits.
Shelby City Council passed the third reading of an ordinance on Monday that will increase the income tax credit currently applied to city income taxes for people who live within Shelby city limits, but also pay a city income tax to the community where they work.
The ordinance passed unanimously and without discussion. Currently the income tax credit sits at 67 percent; starting Jan. 1, 2019, the credit will increase to 75 percent, reducing the collection by approximately $40,000 per year.
Councilman Garland Gates said at the ordinance’s first reading on Oct. 15 that it’s a good sign for the city’s financial status.
“We now see the general fund is in a healthy condition, healthier than it’s been in a long time,” Gates said.
Currently the city of Shelby has a 1.5 percent income tax rate. According to Financial Director Steve Lifer, .3 percent goes towards paying for the Shelby Justice Center, and .2 percent goes towards maintaining streets, alleys and sidewalks. The other 1 percent goes to the city’s general fund.
“That one percent was forgiven if a person worked outside the city of Shelby,” Lifer explained.
That changed in 2015 when it was established that residents who worked outside the city limits would only receive a 67 percent tax credit on the base 1 percent income tax. The measure was put in place due to the city’s struggling general fund at the time.
Since 2016, there has been a steady increase in the annual amount of carryover from year to year in the general fund, according to the ordinance. The city’s new financial status allows for the tax credit to increase.
Lifer explained the credit will apply to income that is earned on and after Jan. 1, 2019. That means citizens will not see the effect of the credit until their tax forms in April 2020.
Council also passed legislation on Monday that will make paying for said income taxes much easier. A new ordinance allows for the finance director to implement the payment of city income taxes by credit card to make payment more convenient.
“The electronic payment of just about everything is becoming more and more widespread,” Gates said.
Electronic payment is also currently available at Shelby’s utilities office. Any fees that come with electronic payment would be paid by the card owner.
The option to pay by credit card will go into effect in 30 days.
