A possible recession is a factor keeping Marysville officials from implementing a commuter income tax credit.
Finance Director Justin Nahvi told the city’s finance committee Monday that he’s recommending the city get more information this year and in 2019 before adding any sort of credit. The credit would provide a quarter or half-percent credit for Marysville residents who work outside the city.
In an interview this morning, Nahvi said his worries stem from the fact that nationwide short-term interest on U.S. Treasury-issued fixed-income securities seems to be rising to potentially overtake long-term interest. According to a CNBC article Nahvi cited, this indicates that economic growth is reaching its peak.
He said this dynamic tends to be a reliable predictor for a recession.
Nahvi said based on what he’s read, he doesn’t believe a recession in 2020 would be as bad as the one in 2008, but it could hurt.
“Any recession’s not good for the population,” Nahvi said.
He did, however, note that government entities are often the last ones to recover from any sort of economic downturn. Money lost during the downturn is restored mainly by taxes.
“It takes time for these monies to build back up,” Nahvi said.
In the meantime, officials are looking at gathering more data from W-2 forms regarding how many people work outside the city. They hope to build up two years of data. Prior to this year, the city did not keep information about where individual residents work.
“Right now, we only have one year,” Nahvi said.
The data would give the city a better idea of how much money it would lose if it implemented a commuter credit. While officials initially estimated that a quarter percent would lose the city $650,000, Nahvi said he now believes that amount could be even higher.
“We have non-filings, income goes up proportionally each year,” Nahvi said. “Even the number that I’ve estimated, it’s definitely going to be higher than that.”
The city plans to carry out two more years of review, then work toward a recommendation to implement a commuter credit in 2021.
Nahvi said that extra data would allow the city to prepare for a possible recession, which he said he’s worried could come in 2020.
“That’s kind of what I’ve still been reading about,” Nahvi said.
City Manager Terry Emery mirrored those points.
Nahvi said officials could provide another update next year after the 2018 tax season. He said at that point, the city will have collected another year’s worth of W-2 data, and can tell council members where it stands.
“We’re really working towards this,” Nahvi said. “I think it’s appropriate, I just want to make sure we have enough data.”
Nahvi said hopefully by 2020 some of the city’s costs can be recouped with taxes from future tenants of the Innovation Park on Industrial Parkway.
Committee member Nevin Taylor expressed support for gathering more information.
“I’m never going to be in favor of it until I know for sure that we’re secure,” Taylor said.