A bill before state legislators is expected to streamline a patchwork of local rules, forms and definitions in regard to Ohio’s numerous municipal income tax, a state office holder says. The bill is meant to institute a simpler, fairer and more friendly system to help spur job creation.
Mayor Rodney Metz disagrees and says the city stands to lose thousands of dollars, if not more, in income tax revenue, which would force them to seek new forms of revenue from local residents.
State Treasurer Josh Mandel proclaims he has taken a leadership role in passing Ohio House Bill 5 because currently every single municipality can set up their own rules and regulations which translates into a job killer for small businesses.
“The proponents of the bill, including state government leaders including myself, are in discussion with mayors and the Mayors Association in order to identify ways in which we can simplify the municipal income tax system without harming municipalities’ ability to provide core services like police and fire,” Mandel said.
Mandel explained the bill, which was introduced by state Reps. Cheryl Grossman, R-Grove City, and Michael Henne, R-Clayton, does not dictate a set income tax rate, but it does standardize the municipal income tax form.
Today, more than 600 local government entities have devised more than 300 different tax forms.
“As a result, our municipal-tax reality is an unnecessary maze of inconsistency, uncertainty and inefficiency,” Mandel said. “There is a reason why no other state subjects its residents and businesses to such a complex and cumbersome web of tax rules and forms.”
For example, he said an electrician in Minster was required to file 39 different municipal tax forms last year. He owed a tax to every city he visited in a single work day, even if he was there for 10 minutes or less.
If he worked in any one of those municipalities more than 12 days in a year, he was required to file its tax forms.
The bill would increase the number of work days to 20 within a year.
Metz is against the bill as introduced and supports the state’s Mayors Association in their stance. He would like to see the bill be at least revenue neutral for the city of Wapakoneta so it could grow revenue as business activity increases and more residents move into the city.
“From what I have read about the bill, I am not in favor of it at all,” Metz said. “I think us municipalities need to be in control of our own income tax collection. In my early reviews of the bill, I understand the city would receive less in income tax revenue and we would have to make those dollars up somewhere else or cut services.”
While the bill would not affect income tax rates, Metz said it hurts Wapakoneta by restricting areas where taxes were previously collected.
At present the city collects 1 percent income tax, one of the lower amounts in the state.
In a story in ThisWeek, Whitehall Mayor Kim Maggard termed the bill as “an effort by a few select special-interest groups to exempt themselves from paying taxes to the local government that provides them with securities such as police and fire protection.”
She said the bill would shift the tax burden “onto unsuspecting residents and to lessen the fair share of corporate taxes paid to municipalities.”
One mayor said the bill is more about reforming taxes than simplifying the tax code. He called it a continued shift of the tax burden onto municipalities from the state so the state’s finances look good while the cities and villages must suffer.
Another mayor objected to a provision called the “Bright Line Test,” a residency test that measures how much work an Ohio resident performs outside Ohio.