Proposed uniform municipal tax code
Local mayors: HB 5 would take money from cities
Several central Ohio mayors and city managers participated in a May 9 press conference at Columbus City Hall to voice their opposition to a proposed bill that would create a uniform municipal tax code statewide.
Sponsors of House Bill 5 say they expect the measure to pass the House of Representatives by late June and then head to the Ohio Senate for its consideration.
State Rep. Cheryl Grossman (R-Grove City) and state Rep. Mike Henne (R-Vandalia) sponsored H.B. 5, which in February was introduced in the House Ways and Means Committee, where it remains.
The next step would be an "interested parties meeting" scheduled for May 14, with proponents and opponents trying to reach an agreement on the specific language of the legislation, Grossman said May 10.
Grossman said she believes the House and Senate would support the bill, as would special-interest groups, and that the bill eventually would become law.
A coalition of 29 organizations, including the Ohio Society of Certified Public Accountants, the National Federation of Independent Businesses, the Ohio Chamber of Commerce, the Association of General Contractors of Ohio and the Ohio Newspaper Association, support the tenets of House Bill 5, Grossman said.
Whitehall Mayor Kim Maggard, who was among those at the May 9 press conference, said H.B. 5 is "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."
Grossman said state Sen. President Keith Saber (R-Celina) considers H.B. 5 "a priority bill."
Maggard said the bill would have a negative impact on the city, and she criticized the motives of the special-interest groups supporting it.
"Special-interest groups hired an arsenal of lobbyists to find a way to disguise this special treatment as a 'uniform tax bill' in order to shift the tax burden onto unsuspecting residents and to lessen the fair share of corporate taxes paid to municipalities," Maggard said.
Grossman said the legislation is needed to prevent businesses from moving out of Ohio because of the complicated system of filing local tax returns.
Despite an above-average economic climate in Ohio, the state remains the most challenging for business owners, especially those whose employees work in multiple places, such as contractors, utility companies, and the media, Grossman has said.
"It's the biggest complaint we hear, that we are unfriendly for businesses," said Grossman, Grove City's former mayor.
She said business owners, in the process of annual tax preparations, have upwards of 300 different tax forms to file.
"No other state even comes close to the number of different tax forms, filing deadlines and other (local) income-tax policies to follow," she said. "We need to clearly define, across the state, income-tax policy to benefit the cities and to make Ohio more user-friendly and business-friendly."
Maggard disputed that the existing tax code is harmful, citing information from multiple trade journals and business publications, including the Dayton Business Journal, that called Ohio "is a textbook example" of a resurgent economy.
"The argument that businesses are moving to other states as a result of the current municipal tax structure just doesn't hold water," she said.
Among the proposed changes H.B. 5 would enact is an increase in the minimum number of days an employee must work before paying income tax to a specific municipality.
Currently, any employee who works at least 12 consecutive days in Whitehall is subject to income tax, but H.B. 5 would increase that number to 20 for all Ohio cities.
Maggard said passage of the bill could take as much as $250,000 annually in income-tax revenue from the city's coffers through a number of changes in how such revenue is collected.
"It's meant to help businesses, ... but it takes money away from cities," Maggard said, adding that business in Ohio is growing -- an indication that businesses need no such incentive to move to or expand in Ohio.
Canal Winchester Mayor Michael Ebert told ThisWeek he thinks H.B. 5 is more about reform than simplifying the tax code.
Ebert said Canal Winchester stands to lose more than $200,000 annually if H.B. 5 were to become law. That loss would follow recent losses of $220,000 annually in Local Government Fund cuts and $220,000 in the elimination of estate taxes.
"They keep taking from the little guy so the state can look good," Ebert said. "(Ohio) is putting all the tax responsibility on the local municipalities who have to go to the voters. ... The state doesn't have to do that. They take and take and take, and we're about taken out."
Canal Winchester has annual revenue of about $15 million to $16 million and has avoided previous losses of revenue through salary freezes.
Ebert said such measures last only so long before a city begins to lose quality employees.
Bexley Mayor Ben Kessler said he thinks the goal of simplifying and streamlining municipal taxation is "laudable," but he does not support H.B. 5 as presented.
"I support the aim but not the concept of further eroding the ability of municipalities to collect income tax," Kessler said.
He said he favors parts of the bill, such as increasing the number of consecutive days a contractor works in a city before income tax is due, because it would have a minimal impact.
"But other parts of House Bill 5 would have a much greater negative impact," Kessler said, particularly with the so-called "Bright Line Test," a residency test that measures how much work an Ohio resident performs outside Ohio.
House Bill 5 would change the definition of a resident of Bexley, he said.
Because Bexley has a relatively low 65-percent income-tax credit for residents working outside the city and paying a tax to another city, the city stands to lose a greater-than-average amount of revenue compared to other Ohio municipalities, he said. Moreover, Bexley has a greater-than-average number of residents who travel outside Ohio on business, he said.
"Our residents who live here get police and fire protection; their kids go to school here, so it should follow (that) their income tax comes here," he said.
Kessler said the city also would lose money because H.B. 5 would allow all Ohio cities to carry forward net operating losses for as many as five years -- a practice Bexley does not permit.