Municipal Tax Reform Badly Needed in Ohio
Called "absurd" and "punitive" by the Tax Foundation, Ohio's municipal tax system stands as an impediment to job creation. Double-taxation, burdensome rules and non-uniform procedures prevent businesses from opening up shop in Ohio. In January, a bill, HB 5, was introduced to reform the municipal tax system in a way that is not hostile to job growth. Unfortunately, a substitute bill has been introduced that strips away vital reforms and leaves the old system essentially untouched. This is the wrong plan for Ohio. ATR joins a tax reform coalition to call for the Ohio legislature to enact true municipal tax reform and bring jobs back to Ohio:
November 5, 2013
Dear Ohio General Assembly Members,
The Tax Foundation rates Ohio’s municipal income tax system as the worst of its kind, describing it as “the most complicated, absurd, and punitive system of municipal taxation in the nation.” This unique system, which will collect nearly $5 billion of revenue this year, is uncompetitive with all other states, seriously impeding Ohio’s ability to create jobs and retain residents.
All of Ohio’s neighboring states, except Pennsylvania, have grown total non-farm employment at a higher percentage rate than Ohio since January 2011. The situation is worsening as Ohio has fallen to 44th among all states in the rate of job creation for the 12 months ending August 2013.
Alone among all states, the General Assembly unwisely granted municipal officials great latitude to define and administer their own separate local income tax schemes. These officials have failed at the task of crafting tax policy in the public interest. Job-killing policies abound such as the frequent double taxation of pass-through business net profit; inadequate operating loss carry forwards; mind-numbing non-uniformity of rules, procedures, and forms; throwback; higher effective tax rates on self-employed business people; and cumbersome rules for casual entrant workers.
After decades of inattention to this debacle, we urge the General Assembly take strong actionthis session to begin substantially overhauling Ohio’s municipal income tax system.
House Bill 5, introduced in January by Rep. Grossman and Rep. Henne, and supported by the Municipal Tax Reform Coalition of 30 major Ohio organizations, offered a promising start for legislation to bring greater uniformity, fairness, and simplicity to the existing crazy-quilt system of over 600 separate municipal income systems in Ohio.
Unfortunately, the chairman of the Ohio House Ways & Means Committee bottled up this high priority bill for over nine months—and now has brought forward a substitute version of his crafting for a possible quick vote. The Tax Foundation has analyzed this substitute proposal and found that many important reforms have been stripped out or watered down and that the plan reaffirms many existing anti-growth tax policies.
General Assembly Members should reject this attempt at a phony reform bill that does little to improve Ohio’s climate for job creation.
Instead, we urge the General Assembly, with support from Governor Kasich, to pass a substantive municipal income tax reform bill this session. Such legislation can be readily crafted by combining the reforms found in HB5 (as introduced) along with additional improvements and reforms embodied in a subsequent version of the bill text prepared by the sponsors of HB5.
For decades, Ohio has trailed the nation in job creation, leading to a large and tragic net out-migration of residents. Ohio cannot be turned around without fixing its municipal income tax system. For the good of Ohioans, we urge the General Assembly to get the job done now – the right way..
Grover Norquist Duane Parde
President, Americans for Tax Reform National Taxpayers Union
Nicole Kaeding Eli Miller
Americans for Prosperity Americans for Prosperity—Ohio
PC: The Honorable John Kasich