BY LISA DONOVAN
The Cincinnati Enquirer
Cincinnati City Council granted a tax break Wednesday that will primarily benefit corporate executives.
Council voted 7-2 to exempt stock options from the 2.1 percent earnings tax levied on those who live or work in Cincinnati.
City officials weren't immediately certain when the exemption becomes effective.
A stock option is a popular form of compensation for executives because it gives them the right to buy shares of their company at a certain price which often is at a discount from the fair market value. The option is taxed when it is exercised.
City officials say they have no way of calculating the cost of the tax break. Estimates of lost revenue ranged from $2 million to $5 million a year.
The earnings tax brings in $164 million a year, 60 percent of the city's general operating fund.
Councilman Todd Portune, co-sponsor of the measure, thinks projected revenue losses have been overstated and that, ultimately, the tax break is bait for business development.
"If it (repealing the tax) acts as an incentive to lure business, there will actually be a net gain."
Business representatives hailed the vote.
"I think this city council sent a clear message to business: "We value you and growth will come to Cincinnati,' " said Pete Langhorne, vice president of office development for Downtown Cincinnati Inc.
Supporters of the exemption have said it keeps Cincinnati competitive with Northern Kentucky, which doesn't have an earnings tax on stock options.
Council members Tyrone Yates and Bobbie Sterne were the only two who voted against the measure.
After the vote, Mrs. Sterne said she was "outraged" by the exemption.
"We've seen in this country, in the last few years, the wealth concentrated in the hands of a few," Mrs. Sterne said.
In Cincinnati, Star Bank and Procter & Gamble are among firms that have granted stock options to employees and not just executives. Daniel Radford, executive secretary-treasurer of the Greater Cincinnati AFL-CIO Labor Council, said opponents may consider an initiative on the November ballot to reverse council's decision.
