High cost of compliance driving reform effort of Ohio’s municipal tax structure
(Columbus, OH) – As taxpayers across the country scramble to meet the annual Tax Day filing deadline, two Ohio lawmakers, along with business owners across the state made their case for reforming Ohio’s municipal tax system.
“Ohio stands alone as the state with the most complicated municipal income tax system in the nation,” said State Representative Cheryl Grossman (R-Grove City). “It continues to be a major impediment to attracting small businesses – and the jobs they bring – to the state of Ohio.”
“I hear nearly every day from businesses both inside and outside Ohio that our municipal tax system is a significant obstacle, and they’re excited about the proposed reforms in House Bill 5,” said State Representative Mike Henne (R-Clayton). “Businesses and individual taxpayers face compliance burdens they wouldn’t in any other state in the country. It’s time to make reasonable, common sense reforms to an overly-cumbersome system.”
Grossman and Henne are co-sponsors of House Bill 5, a bill to unify the way Ohio cities and villages impose their municipal income taxes. Ohio is one of only 10 states where municipalities impose an income tax. Moreover, Ohio is the only state that permits its more than 600 cities and villages to create their own definitions of what is taxable and/or withholdable, mandate use of their own forms, assess varied amounts of penalties and interest, and impose different reporting timetables for tax returns and other tax-related information.
Ohio’s lack of uniformity is costly for Ohio businesses, which spend millions of dollars on record-keeping, computer programming and consultants to track and comply with multiple and varied requirements of the cities in which they do business. For some companies, the cost to prepare and file a tax return is often more than the amount of tax owed.
Jack Buschur, president of Minster-based Buschur Electric in Auglaize County, is one example of how the system hurts businesses. For tax year 2011, Buschur filed one federal return, one state return, and 39 municipal returns. His annual cost to comply with municipal tax requirements is approximately $15,000 to $17,000.
“I pay an average of $150 to prepare and file each tax return; for the majority, I owe less than $5 in taxes,” Buschur said. “When it costs more to file than what I actually owe, something needs to change.”
The patchwork nature of Ohio’s municipal tax structure hurts the state’s economic competitiveness. Businesses are required to spend valuable resources on municipal income tax compliance when they’d much rather invest those resources in business growth.
HB 5 was introduced on January 30, 2013. Representatives Grossman and Henne have worked with stakeholders including local government officials and the business community for more than two years to craft a bill that creates common sense uniformity while keeping the system as revenue neutral as possible for local cities and villages. The bill is currently before the House Ways and Means Committee and hearings are expected to continue later this month.
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For more information about the Municipal Tax Reform Coalition visit www.MuniTaxReform.org. Follow the coalition on Twitter: @OHMuniTaxReform.
The Municipal Tax Reform Coalition is a broad partnership of organizations representing thousands of individual business owners and workers across the state. It includes the Ohio Society of CPAs, Ohio Chamber of Commerce, NFIB-Ohio, Associated Builders and Contractors of Ohio, Associated General Contractors of Ohio, Central Ohio NECA, The Cincinnati USA Regional Chamber, Columbus Chamber of Commerce, Dayton Area Chamber of Commerce, Greater Cleveland NECA, Greater Ohio Policy Center, North Central Ohio NECA, Ohio Association of Realtors, Ohio Automobile Dealers Association, Ohio Cable Telecommunications Association, Ohio Contractors Association, Ohio Council of Retail Merchants, Ohio Home Builders Association, Ohio Insurance Institute, Ohio Manufacturers’ Association, Ohio Newspaper Association, The Ohio Nursery & Landscape Association, Ohio Produce Growers and Marketers Association, Ohio Restaurant Association, Ohio State Bar Association, Ohio State Medical Association, Ohio Trucking Association, and the Toledo Regional Chamber of Commerce.