Ease, and not just shift, the burden
Ohio Treasurer Josh Mandel has expressed support for House Bill 5, which would make municipal income tax procedures uniform across the state.
“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” Mandel states. “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.”
We agree with that assessment, and elected leaders in municipalities that have income taxes likely understand the argument.
Mandel provided an example – an electrician in Minster who had to file income tax forms from 39 communities 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,” Mandel wrote.
Again, point taken. But legislators and administrators in municipalities that would be impacted by the bill are rightly concerned about two things: the loss of local control in collecting local income taxes, and the loss of income tax revenue.
That first matter can be addressed by amending the current house bill. Assuaging the second issue would require cooperation come budget time.
The bill requires all municipalities to permit taxpayers to deduct net operating losses and to carry excess losses forward for deduction for five subsequent years. This could result in lower revenues for some cities and villages.
But the net-operating-loss rule change is to be phased in over five years, rising from 20 percent of the full amount in the first year to 100 percent the fifth year.
Surely, with the state budget picture improving, the state could begin increasing local government funding to cover those losses. And, it could be phased in over five years.
Easing the tax-compliance burden for businesses in Ohio is a fine objective for state legislators. Making cities and villages carry that burden would be unfair.