Representatives from around southeast Ohio echoed the city of Athens' concerns during a press conference Monday afternoon regarding a bill that would aims to create income tax uniformity in the state. The bill narrowly passed in the Ohio House of Representatives on Nov. 13 and it will now go to the State Senate.
Representatives from around southeast Ohio echoed the city of Athens’ concerns during a press conference Monday afternoon regarding a bill that would aims to create income tax uniformity in the state. The bill narrowly passed in the Ohio House of Representatives on Nov. 13 and it will now go to the State Senate.
Administrators in the city of Athens have stated that the way Sub H.B. 5 is written now, Athens and many other municipalities around the state stand to lose significant income tax revenue. Athens Auditor Kathy Hecht and tax administrator Tina Timberman have said that the loss in revenue could force municipalities to either cut services such as police and firefighters or raise taxes.
“It’s hard enough to go to the taxpayers and say ‘Give us more money’ just because we lost it somehow. We lost it up in Columbus. We ask for your support to stop this bill from mandating revenue losses for municipalities,” said Athens Mayor Paul Wiehl during the press conference held in Athens City Hall.
In addition to Athens officials, representatives from Belpre, Marietta, Gallipolis, Lancaster, Nelsonville, Zanesville and Pomeroy were in attendance to learn about the bill and express their concerns.
The press conference also hosted a panel of speakers including Ohio Municipal League spokesman Kent Scarrett, State Rep. Debbie Phillips, D-Albany, and State Sen. Lou Gentile, D-Steubenville.
According to Scarrett, the Ohio Municipal League has worked with the state legislature to draft bills pertaining to income tax collection in the past; however, this is the first time the OML has actively opposed such a bill. He said the loss of revenue for municipalities is OML’s biggest concern.
“What has been presented to us is something our municipalities just can afford,” Scarrett said.
The city of Athens has pointed out three particular sections of the bill that could have a big impact on municipal income tax revenue.
The bill as written mandates a five-year Net Operating Loss for every municipality. Currently, Athens is one of 240 (42 percent of the state) municipalities that does not allow a NOL or has less than a five-year NOL. Timberman estimates this could cost the city a minimum of $62,000 per year over seven years.
Another issue is that a last-minute addition to the bill added offset language without warning.
“The language allows losses to offset any income, regardless of where it was earned or lost. For example, an Athens resident has rentals located in Columbus and Athens. The Columbus rental loses money and they report that loss on their Columbus tax return. The loss is recorded by Columbus and according to the mandated five-year NOL, Columbus would be required to carry forward that loss to offset future profits. Now with Sub HB5, not only is that loss used in Columbus, it is also allowed to be used against any gain they had on Athens rental income,” cited a letter that Athens administration drafted and sent to state senators throughout the region.
“With the rentals in Athens, offsets could be devastating for us,” said Timberman.
The city is also concerned about the occasional entrance law. The current law allows an employee to work in the city limits for up to 12 days without being liable for city income tax. However, if working 13 days or more, that employee must pay income tax dating back to the first day they worked in the city.
In Sub H.B. 5, the law would be changed to allow employees to work in the city up to 20 days without being taxed. If a person works more than 20 days, the person would only be liable for income tax after the 20th day.
Wiehl said that Athens is unique in that it is a college community and that construction projects are often squeezed into the few summer months when the 20,000 students are gone. Not having the ability to tax those construction workers for nearly a month could have a big impact on city revenue.
Representatives from municipalities around the state have said they’re concerned about this possible bill coupled with other state funding losses such as a major reduction of local government funds, tangible personal property taxes and estate taxes.
Athens representatives have said that they support uniform income tax implementation, but that this bill isn’t the answer.
Phillips said the proponents of the legislation had good goals in trying to simplify income tax regulations for businesses and reducing paperwork, but that the revenue loss for municipalities would affect the quality of life that attracts businesses to cities. She said municipalities need well-maintained streets, first responders and strong schools to attract and retain businesses.
Phillips said she hopes that the Senate can help restore some of the negotiated solutions in the bill that were changed at the last minute.
“Unfortunately, some of the last minute changes that were introduced to the bill created new problems,” Phillips said.
“I would say to Senate leaders, ‘Let’s not rush this through,’” said Gentile. “I think that the Municipal League has some good points that they want to make with respect to how they want to modify this legislation. They made their point very clear that we’re not opposed to the idea of uniformity, but revenue impacts would seek to further complicate and compromise the ability of local officials…in municipalities to provide basic services.”
State Rep. Gary Scherer, R-Circleville, is a CPA who serves on the House Ways and Means Committee. This is the committee in which Sub H.B. 5 was generated. Scherer was in attendance during Monday’s press conference and said that Ohio has the most complicated income tax implementation system in the entire nation.
While he is a proponent of the legislation, Scherer admitted, “It’s not a perfect bill.”