PDT Staff Writer
Portsmouth City Auditor Trent Williams has joined municipal fiscal officers across the state in opposing House Bill 5. House Bill 5 is a municipal tax bill co-sponsored by Ohio House Majority Whip Cheryl Grossman (R-Grove City) and Rep. Mike Henne (R-Vandalia). It was introduced to the Ohio General Assembly on Jan. 30, 2013 with the proposed purpose of promoting uniformity and simplicity within Ohio’s municipal income tax structure while maintaining a degree of revenue neutrality for all municipalities involved.
“As Ohio’s treasurer and watchdog of Ohioans’ hard-earned dollars, I am proud to stand up to support sanity and fiscal responsibility in state and local government. That’s why I urge the Ohio legislature to pass House Bill 5 in order to simplify Ohio’s municipal income-tax system,” State Treasurer Josh Mandel said in an e-mail to the Daily Times. “Ohio is the only state in which every city and village sets its own rules and regulations about who must pay taxes, how much and on what type of income. 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.”
Williams said he disagrees with the premise of the bill and cites two points directly from the Ohio Legislative Service Commission Revised Fiscal Note and Local Impact Statement under Local Fiscal Highlights.
- “The bill’s provisions are likely to create, overall, a net revenue loss to municipalities, beginning with taxable years starting on or after Jan. 1, 2015. The revenue impact on a specific municipality will be dependent on changes made by the bill and the Municipal Tax Policy Board to existing income tax ordinances. Though total revenue losses to municipalities are undetermined, they may be significant, potentially millions of dollars annually.”
- “Certain provisions may increase costs to municipalities to conform to changes required by the bill and the Municipal Tax Policy Board.”
“These first two highlights alone, cause caution and question to me and I think most municipalities in that the bill is setup for us to lose revenue and increase our expenses,” Williams said. “In addition to the fact that HB5 will take away local administrative control and enforcement and place it in the hands of the State. This doesn’t align with the way local governments were intended to self-govern, especially under home rule municipalities. Another concern shared by many local governments would be with the State then, no doubt, taking the next step toward centralized collections especially given the distrust from the reduction of Local Government Funds.”
In supporting the bill, Mandel said, “For example, 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 workday, 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.”
Williams said he too is in favor of streamlining the system, but not the way HB5 structures it.
“I think we are all for allowing business to flourish and for greater uniformity in the administration of municipal income tax. I know that the Ohio Municipal League, of which the City of Portsmouth is a member, has been working in good faith to bring about improvements in a responsible approach to the local tax systems without gutting local budgets and reducing the vital services we provide every day to local citizens,” Williams said.
Williams said the City of Portsmouth, as with most all municipalities in Ohio, is still suffering from and dealing with the effects of severe budget cuts and revenue loss from the phase-out of tangible personal property tax and promised reimbursements, the elimination of estate tax and most recently the 50 percent reduction of the local government funding, a fund that was set up decades ago to help provide municipalities with basic services.
“The Local Government fund has now been cut in half in order to balance the State’s budget and provide it with a surplus,” Williams said. “For the City of Portsmouth, these cuts have resulted in a reduction in revenue over the past few years of over $1.2 million annually. In a $9 to 10 million General Fund budget, that is pretty substantial, contributing greatly to the City’s 2012 year-end General Fund deficit balance of -$900,000.”
Mandel said more than 20 organizations representing thousands of Ohioans agree that the multitude of municipal income-tax regulations on the books stifles economic growth. Small businesses are supporting this legislation not because they believe they will pay less in taxes but because they hope to spend less time and money on confusing bureaucracy and more on creating jobs. If local businesses are able to invest in increasing sales and productivity instead of funding an army of compliance officers, it will be a net positive for job growth.
Ohio United, an advocacy group for Ohio’s cities, opposes HB5 on grounds that it “redefines ‘taxable income,’ in many cases significantly reducing tax revenue to cities and villages; puts control of local income tax policy in the hands of a bureaucratic policy board totally disconnected from the community in which the taxpayers live (versus local city council members); defers collection dates and delinquency dates such that significant negative cash flow effects will hurt communities’ ability to finance local government; makes tax policy more complex, not less.”
It also says that while the overall goal of uniformity and cost reduction is desirable, HB 5 does not achieve that goal.
“It is my hope that our State Representatives will work with our local governments to achieve a significant business friendly, revenue neutral, responsible approach toward more uniformity in our municipal income tax systems along with returning Local Government Funds to local governments,” Williams said.
Frank Lewis may be reached at 740-353-3101, ext. 252, or at firstname.lastname@example.org. For breaking news, follow Frank on Twitter @FrankLewisPDT