OSCPA staff report
Centralized collection of municipal income taxes in Ohio would not only improve the state’s business climate but it would save money for cities.
That was the testimony of Timothy Keen, director of the Ohio Office of Budget and Management on Wednesday before the House Finance and Appropriations Committee. Keen, an appointee of Gov. John Kasich, offered the first testimony on the governor’s biennial budget proposal, which was released Jan. 30.
Keen pointed to Ohio’s success in collecting other taxes for local entities.
“The state has collected the sales tax on behalf of the counties and the transit authorities since the late 60s or early 70s … and not one dime has ever not found its way back to where it’s supposed to go,” he said. “We have collected the school district income tax since … the early 80s and the school districts get all their money. So we can easily bring our efficiencies and economies of scale to bear and provide for the business community of this state a reduced burden, collect these dollars, send them right to where they belong and save the locals some money to boot. So, I’m not certain what the concern is.”
That statement was part of Keen’s response to Rep. John Patterson, D-Jefferson, who asked him to allay fears of his constituent municipalities about losing local control.
Keen said in addition to making compliance easier for taxpayers and businesses, cities would benefit from $9 million in cost savings statewide, according to the Ohio Department of Taxation.
“The economies of scale (in the budget proposal) are significant, and they can bring those to bear through collections, through public information, through audit that can be of benefit to all the recipients of this,” Keen said.
The proposal spells out major reforms to Ohio’s burdensome municipal income tax system and other types of state taxation, several of which were recommended last year by OSCPA’s Ohio Tax Reform Task Force. The group worked for more than a year developing recommendations after state leaders asked for guidance on how to make Ohio’s tax structure more competitive. OSCPA presented its recommendations to the Ohio Legislature in June, and Ohio Tax Commissioner Joe Testa met with the task force in September at OSCPA’s offices to learn more.
The budget contains provisions that will impact other Ohio taxes, education, economic development and more, including these ideas endorsed by OSCPA:
- Elimination of the throwback rule used by a number of Ohio municipalities.
- No increase in the Commercial Activity Tax rate for Ohio businesses.
- Shrinking the number of income tax brackets from 9 to 5.
Also included were an income tax cut, a sales tax increase, and an expanded list of services to be taxed. Details were included in this week's Member Alert.
Keen said in forecasting the budget, his office assumed moderate economic growth in Ohio in the coming years. Growth here has lagged, he said, possibly because a strong dollar has hurt manufacturing and because Ohio has become an energy producing state and has been affected by a drop in energy prices. On the plus side, he said, the state’s unemployment rate “is very close to what is estimated to be full employment,” slow population growth and retirements will help keep it that way and wages are expected to “increase faster than they have been.”
Read the Administration’s summary of the budget bill package released Jan. 30.