Cincinnati should not panic over its $10.5 million budget deficit and grasp at short-sighted fixes. Past councils already tried taxing executive stock options and decided they didn't like the results. In 1997, two big corporations - Jacor Communications and Omnicare - moved to Northern Kentucky and cited Cincinnati's stock options tax as the chief reason. Kentucky's local wage tax is imposed only on wages up to the maximum FICA wage base ($87,900 for 2004). Executives who decide where companies relocate also are likely to receive stock options. In 1998, the year after Jacor and Omnicare left, Cincinnati City Council voted to go back to exempting exercised stock options from the earnings tax.

Had those companies stayed, tax revenues from corporate and employee earnings would have more than made up for losses from not taxing stock options.

Cincinnati needs to expand its tax base with new money and fortify its future with reliable revenue streams. Stock option taxes are about as predictable as the stock market. In bad times, revenue from stock options most likely would shrink, making city revenue shortages worse.

Up until this year, Cincinnati could cushion the loss of employee stock option taxes by not letting corporations reduce their city income taxes by that amount. But that "add-back" was ended when Ohio lawmakers last year standardized local taxes on corporations. Ohio's changes took effect Jan.1, 2004. Greater Cincinnati Chamber of Commerce President Michael Fisher said the chamber is willing to support an Ohio bill to restore that local option to Cincinnati.

Ohio lawmakers should grant the "add-back." It would still leave border cities at some disadvantage, but at least Cincinnati development officials could still pitch executives on the personal stock option advantages of locating companies here.