By John Kiesewetter
The Cincinnati Enquirer

MIDDLETOWN - Up to 4,000 residents could be paying city taxes this year if City Council approves a reduction in the 0.5 percent local income tax credit.

The financially strapped city could collect about $570,000 by taxing residents who work outside the city and pay an earnings tax to another municipality, said John Lyons, city finance director.

But that amount is about half the $1.1 million the city had expected to raise from the move when it was tabled by council in December, Lyons said.

The estimated revenue was revised after reviewing city income tax filings this year, he said.

The loss of jobs at AK Steel, paper mills and other companies in recent years has made Middletown a bedroom community. U.S. Census data indicates that 10,600 residents work in the city, while 12,400 residents are employed out of town.

Council can roll back the local tax credit without placing the question on the ballot, Lyons said.

At the same time, council also is considering a 0.5 percentage point increase to the city's 1.5 percent income tax.

Voters would have to approve the tax increase, which would raise about $5.8 million.

Council read the ordinance for the first time Tuesday. A second reading and vote are needed for the ordinances to be adopted.

City Manager Ron Olson has projected a $2.5 million budget deficit for next year, after council made deep cuts in all departments for the 2004 budget.

E-mail jkiesewetter@enquirer.com