By Cheryl Splain, KnoxPages.com Reporter
MOUNT VERNON — City Council members voted Monday night to join a coalition of municipalities fighting what they call a power grab by the State of Ohio. Council suspended the required three readings and passed the legislation as an emergency.
A provision in Gov. John Kasich’s budget bill allows businesses operating in more than one municipality to file one income tax return to the state rather than each municipality in which it operates. The state will collect the tax owed, and then, for a fee, send it to the municipality.
Municipalities oppose the bill on the grounds that it’s unconstitutional and violates the home rule authority of local governments to administer and enforce their own municipal income tax. A second reason for opposing the provision is that it violates the single-subject legislation provision.
The current collection fee is ½ percent. City Auditor Terry Scott said that if the law was in effect in 2016, the city would have paid a $7,000 fee to the state. “If they were to reach further and assume taking the entire tax system over,” he said, “it could cost us more than $55,000 just in the fee. You are always at a risk determining how soon they will want to increase that fee.”
Scott said that on a broader level, the ½ percent collection fee on the $600 million collected statewide is “$3 million the state gets for the state treasurer to do nothing.”
“Not only is the state taking over collection, but it’s putting handcuffs on you if you don’t go with the plan. You’ll have no authority to tax anybody in your jurisdiction,” he told council.
Councilman Sam Barone said the state is “picking the low-hanging fruit” as a way to skim off revenue from municipalities.
City Treasurer Anton “Bud” Krutsch said the city will receive its tax money whenever the state decides to pay. “There’s nothing that says the state has to remit that to us in a timely manner,” he said. Currently the city receives the money daily and has instant access to its use.
He also said the city will have “no visibility on tax returns,” which means the city loses the ability to forecast any revenues. “We will never know if a corporation has a loss, a $250,000 rollover…we won’t know,” he said.
Another problem is that businesses have to opt into filing one return to the state vs multiple returns to the municipalities. “We have to do it, but businesses can opt in to do it,” said Krutsch. That means two separate tax codes must be maintained.
By joining the coalition, the city will pay $4,000 as its share of legal fees. “It does cost money to litigate, so I think the request for some funding to join this suit is warranted,” said Barone, adding that in the overall scheme of things, the $4,000 is a pittance compared to the potential revenue the city will lose.
Councilwoman Nancy Vail said council must be wary of the next step the state may take: “collecting all taxes and only giving us a portion back.”
Councilman John Booth also supports joining the lawsuit. “In the past few years we’ve seen the state reach in and take away local government funds,” he said. “These are our funds voted on by residents here.”
The law takes effect Jan. 1, 2018. City Law Director Rob Broeren said that the lawsuit will be filed before then and will seek an injunction to keep the law from going into effect.