EDITORIAL: Tax reform

The (Findlay) Courier (April 5, 2013)

Ohio's municipal income tax code isn't broken. It works just fine for the cities and towns which collect the tax from individuals and businesses. 

The problem is the code is bulky, and collecting taxes is far from business-friendly.

Ohio is the only state that allows every municipality to set its own income taxes. It has 600 municipalities using 300 different forms, each municipality with its own rate, definition of tax, filing requirements, deadlines and reciprocity amounts.

That can create a filing nightmare and excessive costs for companies, especially those that do business in multiple places.

House Bill 5, introduced in January, aims to simplify and standardize local income tax codes.

It would overhaul some aspects of collection by requiring municipalities to standardize some of their definitions and deductions, and by not counting anything less than a half-day as a work day for income tax purposes.

It also would expand the number of days that someone must work in a community before he is liable for income tax there. Currently, the threshold is 12 days per year. The proposal would increase that to 20 days.

While it does not centralize collections, as some had feared, it does call for a new municipal tax policy board to oversee what communities are doing.

Some opponents believe the changes aren't directed at uniformity, but rather at helping some businesses pay less tax.

That could drastically reduce the amount of money that municipalities collect.

Some even fear the new law could be a first step toward prohibiting communities from setting their own income tax rates and handling their own tax collection.

Rep. Robert Sprague, R-Findlay, said this week that reform is needed, but that House Bill 5, as written, may not be the right way to do it. While some provisions would reduce paperwork for business, others could make it worse.

Sponsors had hoped to have the bill approved by June, but that appears unlikely considering the opposition, primarily from cities and villages.

Still, lawmakers should continue reform efforts.

Time and money are wasted each year as small businesses and taxpayers try to meet tax obligations in each jurisdiction where they live and work. That could be spent on growing business and adding jobs.

Now seems the right time for the state to work toward a simpler, fairer system. With the budget balanced, but the economy still in need of a boost, the emphasis should be to make the state more attractive to business.

Meanwhile, municipalities shouldn't suffer. Most are recovering from cuts in local government funds from Columbus, and lawmakers should seek only changes that are revenue-neutral.

It will be a difficult task finding the right balance between the competing interests of business and governments. But streamlining the municipal tax code is a deserving effort.