By Andrea Cordle
As part of the state biennial operating budget, Governor John Kasich proposed a measure to place business income tax collection under the state’s control instead of keeping it under local municipal control.
Officials in Grove City oppose this proposal and they plan to let state legislators know.
“Local governments are really under attack,” said councilman Ted Berry at the April 17 Grove City council meeting.
Council members and the city’s administration discussed a formal resolution of opposition to send to Ohio lawmakers.
The state proposal would give the state tax commissioner sole authority to administer and enforce the municipal net profit tax.
Grove City leaders say this goes against home rule, which grants governing powers to municipalities by the Ohio Constitution.
“We cannot allow the state to tell local municipalities how to govern,” said Berry.
According to city legislation, the proposal would adversely affect municipalities with tax revenue from warehouses, distribution centers and businesses providing online sales.
Grove City Mayor Richard “Ike” Stage said the city is a distribution center community. He believes if the the state removes the net profit tax as a municipal tax, the city would lose revenue.
“There are some fundamental problems,” said Stage.
Stage also said taxes levied in the city were voted on by local residents.
“I hate to use this term, but it’s like being hijacked by the state,” said Stage.
Under the governor’s plan, which is included in his proposed state budget and would still have to be approved by the state legislature before becoming a reality, the state would set up a centralized system to collect business income taxes and then distribute tax receipts to the intended municipalities.
According to a press release from the governor’s office, the business benefits of such a system are: uniformity and simplicity with one return, one place to file, one set of rules, and one audit rather than various sets of rules and filing requirements from various municipalities; and reduced cost of compliance, bookkeeping, paperwork and red tape.
The municipal benefits, according to the governor’s press release, would be: reduced administrative costs as the Ohio Department of Taxation would retain only 1 percent of the collections as opposed to the 2.5 to 3 percent often charged to cities by third party administrators; increased compliance and collections through enhanced screening; and municipalities would retain control of tax rates and credits.
According to Grove City legislation, the municipal income tax is the largest revenue source, which provides essential local services and promotes quality of life for local residents and business owners. Any forced reduction of this revenue would have a negative impact on Grove City residents and businesses. City leaders also believe the state proposal would conflict with the city’s plan to retain and attract business.
Though many city officials are against the governor’s plan, council voted to postpone the resolution to formally send their opposition to state lawmakers.
Councilman Jeff Davis said the bill is going through the House of Representatives and when it comes out, it may include amendments or changes to the bill. Davis said it makes sense to wait and see what the state representatives have done before the city sends along its opposition.
Once the budget goes through the House, it would move on to the Senate.