MOUNT VERNON — Bowing to what Councilman Sam Barone called a highly coercive move by the Ohio Legislature, council members amended the city’s municipal income tax code on Monday night. If they did not, the city would lose the ability to collect income tax at all.
A provision in House Bill 49, Gov. John Kasich’s budget bill, allows businesses that operate in multiple jurisdictions to file one municipal income tax return through the state’s Ohio Business Gateway; previously, they filed a return with each municipality. The state will then send the money to the various municipalities, minus a 0.5 percent administrative fee.
Mount Vernon joined more than 100 municipalities in challenging the legality of HB 49; the suit said HB 49 violated municipalities’ right to self-govern. On Feb. 26, Judge David Cain of the Franklin County Court of Common Pleas ruled in favor of the state and dismissed the suit.
“None of us are happy about this,” said Barone. “We find it to be coercive, more than a little bit coercive, on the part of the legislature, removing from us the opportunity to collect our own tax revenue and taking a ½ percent administrative fee in the process of returning our own money to us.”
Law Director Rob Broeren said the city also loses documentation and lack of accounting with the provision. “All we get is a check and company name,” he said. “We won’t have the ability to determine if they are making the correct payment. In the end, we need to pass a piece of legislation this evening to allow us to continue to collect income tax, whether we like it or not.”
Auditor Terry Scott agreed, saying, “What we won’t get is a tax return; that will be handled by the state. The tax office won’t have a clue whether it’s been handled properly or filed properly.”
The state is to send a check monthly, with interest, to the municipalities for the businesses that opt in to the program. Businesses affected are those that operate in more than one jurisdiction, such as fast-food restaurants and contractors. Businesses that operate in only one jurisdiction will still file their income tax returns locally.
State Tax Commissioner Joe Testa has said the provision counteracts an “excessive burden for businesses” that have to file more than one tax return.
In addition to lack of accountability, losing the administrative fee, and the effect on cash flow, city and council officials are concerned about what the future holds in terms of power given to the state.
“We joined the suit maybe not so much for [this provision], but for what might happen in the future,” said Barone.
Scott said that Testa is adamant about moving all tax collection efforts to the state and that Testa sees no need for local income tax offices. The state already collects school taxes and sales tax in this manner.
“I don’t think this is the end of what you are going to see in this area,” he told council.
