Sheridan Nolen

Ohio Commuters Taxed by Cities Where They Used to Work

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Posted by Sheridan Nolen on Wednesday, November 25th, 2020, 4:17 PM PERMALINK

Ohio’s current local income tax structure allows municipalities to tax employees even if they do not physically work in the city that is taxing them.  

This is a common rationale: employees can be taxed based upon where they work because they are using city resources like police, fire, and other public services while they are at work. 

However, what happens when people stop actually working at that location?  Ohio Governor Mike DeWine’s statewide COVID-19 Stay-at-Home order earlier this year has forced many employees to work from home. This means Ohioans are paying taxes to cities whose services they no longer use. 

At the beginning of the pandemic in March, lawmakers passed HB 197 which deemed all work performed at private homes during the public health emergency to have been performed at the employees’ principal place of work for the purposes of taxation. In other words, cities were permitted to collect income tax dollars as though businesses were operating under normal circumstances.  

This was originally passed under the assumption that it would be a temporary law, only to stay in place until 30 days after Gov. Mike DeWine ended his state of emergency declaration. As the pandemic has carried on far longer than initially anticipated, the temporary nature of the law has been strained.  

In July, The Buckeye Institute and three of its employees filed a lawsuit against the City of Columbus and the State of Ohio. The lawsuit asserts it is unconstitutional to allow cities to tax income of workers who do not live there, and were not permitted to work there during the Stay-at-Home order. 

In order to comply with Ohio’s emergency orders, which required nonessential businesses to close, The Buckeye Institute required its employees to work from home. According to The Buckeye Institute, this is unlawful taxation and “a clear violation of due process rights under the Fifth and Fourteenth Amendments to the U.S. Constitution and violates Article I, Section 1 of the Ohio Constitution.” 

Robert Alt, President of The Buckeye Institute, cited the Hillenmeyer v. Cleveland Board of Review Supreme Court decision from 2015. In Hillenmeyer, the Court unanimously decided that local taxation of a non-resident's services must be based on the location of that person when the work was performed.  

While the Ohio Supreme Court deliberates on the case, state legislators have said they plan to work on passing a new law before the end of the year. Two companion bills, inspired by The Buckeye Institute’s lawsuit, have been introduced in the Ohio Legislature.  

Rep. Kris Jordan, R-Delaware, has sponsored HB 754 and Sen. Kristina Roegner, R-Hudson, has introduced its companion, SB 352. Both pieces of legislation would amend income tax withholding rules for work-from-home employees related to the COVID-19 pandemic. Employees in Ohio would be taxed where they live rather than where they work.  

Sen. Roegner said, “I don’t believe it’s constitutional to be able to tax someone that doesn’t step foot in your city.”  

However, while various lawmakers like Roegner have expressed their beliefs that the law is unfair, cities across Ohio say repealing the temporary law would hurt city budgets. Organizations, such as the Ohio Municipal League, have also come out against such legislation.  

Ohio Municipal League Executive Director, Kent Scarrett, said that “any shift from how income taxes are collected with the coronavirus emergency measure needs extensive debate.” Membership to the Ohio Municipal League is given to any city or village in Ohio that pays annual dues. In other words, many people who are directly part of City Government are key members of the Ohio Municipal League.  

If a new law is not passed before the end of the 133rd General Assembly, Sen. Roegner has promised to bring a new bill back to the Statehouse in January 2021. 

The lawsuit and pending legislation of HB 754 and SB 352 could benefit taxpayers during the pandemic by simplifying how they pay taxes. 

Photo Credit: Nicholas Eckhart

Californians Face Billions of Dollars in Tax Hikes On the Ballot

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Posted by Sheridan Nolen on Tuesday, November 3rd, 2020, 5:18 PM PERMALINK

Today, Californians will be facing billions of dollars in state and, in some cases, local tax hikes on the general election ballot. If approved by voters, these measures would make California an even less attractive place to live, invest, and do business.  

California is already home to some of the highest tax rates in the country. Its top marginal individual income tax rate of 13.30% is the highest in the nation. Its gas tax rate of 62.47 cents per gallon is also the highest. Its combined state and local sales tax rate of 8.66% is 9th highest. Its corporate tax rate of 8.84% is 8th highest.  No wonder the Tax Foundation ranks California 49th best on its State Business Tax Climate Index.

Yet, things may soon get worse. 

Proposition 15, which will appear before all California voters, would remove the Proposition 13 property tax limit (a voter approved measure that limits the annual rise in the taxable value of a property, both personal and commercial, at 2% or the rate of inflation, whichever is smaller) for commercial properties. This split-roll concept – where commercial and residential properties do not face the same tax rates, ratios, or assessment schedules – could raise taxes on California employers by as much as $12 billion annually! 

Proponents of Proposition 15 claim it would only impact large commercial property owners, but that is not true. In reality, this tax hike would also impact small businesses who rent. As John Kabateck at the National Federation of Independent Business explains, “the majority of small business owners, upwards of 80%, rent their property. That cost is passed on directly from property owners.” Ultimately, this tax hike would be passed onto consumers in the form of higher prices or workers in the form of fewer jobs and lower wages. 

Unfortunately for Californians, that is not the only property tax hike that will appear before them. Voters across the Golden State will also be deciding on Proposition 19, which would raise taxes on families by repealing Proposition 58 (a voter approved measure that allows certain properties to be transferred between families without reassessment). 

According to the Howard Jarvis Taxpayers Association, Proposition 19 was put on the ballot via a last-minute backroom deal among legislators. The non-partisan California Legislative Analyst's Office has noted that Proposition 19 could eventually cost California families two billion dollars annually in higher property tax bills. 

In some parts of California, voters will also be deciding on local tax hikes. Residents of San Francisco, for example, will be voting on: 

Proposition RR, which would generate more hard-earned tax dollars for Caltrain rail services in the form of an additional 0.125 percentage sales tax. If approved, this sales tax, which would remain in place for at least thirty years, would take the San Francisco sales tax rate from 8.5% to 8.625%. 

Proposition I, which would raise the real estate transfer tax. If approved, transactions of $10 million to $25 million would face a tax rate of 5.5%, and transactions of $25 million or more would face a tax rate of 6%. 

Proposition L, which would impose an additional gross receipts tax of 0.1 to 0.6 percent or a payroll tax of 0.2 to 2.4 percent on businesses whose highest managerial employees have salaries 100x’s greater than the median compensation for employees. 

Since March, a number of successful business owners and entrepreneurs have come out against California’s tax climate and incompetent governance. Just last month, Jeffrey Gundlach, a billionaire bond fund manager and founder of DoubleLine Capital LP, tweeted

“Elon Musk, Joe Rogan and Ben Shapiro, to name just a few, are leaving California to escape incompetent governance. The ‘response’ from Sacramento?  Wealth and massive income tax increases on job creators (AKA 'the wealthy').” 

This is part of a larger trend of people fleeing the Golden State to escape the high taxes and expensive cost of living. According to the Internal Revenue Service’s Migration Data, California saw a net loss of 153,197 residents between 2017 and 2018. In addition to people migrating out of California, there was a net loss of $7,983,739,000 leaving the state.  

A rational lawmaker would recognize it is time to lower taxes and figure out other ways to encourage people to stay in California. Instead, Democrats have focused on exporting California’s tax burden. This past August, lawmakers in Sacramento proposed legislation that would impose a 0.4% wealth tax on anyone whose net worth is greater than $30 million that, alarmingly, would apply to former residents for 10 years after they leave the state.  

To come up with such an outrageous policy, lawmakers must know that California is driving businesses and people away. But they love to tax and spend, so they are still piling on with MORE tax hikes. 

Gov. Gavin Newsome and the Democrat party support Propositions 15 and 19. If approved, these tax hikes will only give taxpayers another reason to leave California. 


Photo Credit: Ray_LAC

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Illinois “Fair Tax” Amendment Opens Door for Billions in Additional Tax Hikes

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Posted by Miriam Roff, Sheridan Nolen on Wednesday, October 21st, 2020, 3:36 PM PERMALINK

The fate of Illinois’ constitutionally mandated flat tax lies in the hand of voters, who will decide on Nov. 3, 2020 whether or not to adopt the Proposed Amendment to the 1970 Illinois Constitution— also known as the “fair tax” amendment or the “Illinois Allow for Graduated Income Tax Amendment.”

A NO vote would uphold the state’s current 4.95% flat income tax rate. A YES vote would open the door for significant state income tax hike, with the top rate rising to 7.99%.

By voting YES, voters will eliminate the only safeguard Illinois taxpayers have against income tax hikes, the flat tax— allowing Governor J.B. Pritzker and the Democrat-controlled state legislature to impose some of the highest tax rates in the nation with little or no recourse. If the measure is approved, on January 1, 2021 Illinois would move from a flat 4.95% income tax to new six bracket system with rates ranging from 4.75% to 7.99%, resulting in a  $3.7 billion income tax increase. 

It’s important to note that although the new rates and brackets, as passed by the Democrat-led legislature under SB 687 in 2019, are separate from the proposed constitutional amendment, this $3.7 billion income tax hike is completely dependent upon voters permitting a graduated-rate income tax structure.

Proponents of the progressive tax amendment are selling it as the be-all-end-all solution for ending the state’s infamous budgetary woes, claiming SB 687 will actually lower taxes for 97 percent of Illinois residents. The former is a flat out lie, whereas the latter is barely even a half truth.

If the amendment is approved, it’s true that Illinois taxpayers with up to $100,000 in income would see their marginal tax rate drop from 4.95% to 4.75% or 4.90% depending on their income level. However, the expected $3.7 billion in new revenue raised off the backs of the rest of the populace would barely make a dent in Illinois’ whopping $226 billion deficit.

Further, the proposed amendment does not contain language that limits the amount of tax brackets state lawmakers can create or how high they can raise taxes. The graduated income tax measure also provides zero accountability measures on how the new money will be spent and fails to address years of runaway spending. Keep in mind the Governor has promised over $10 billion in new spending despite the state being broke. Odds are any tax relief for middle and lower-income families would be short-lived.

According to research conducted by Americans for Tax Reform, government spending has ballooned over the last decade. In fact, Illinois had the nation’s second highest increase in spending per capita, rising 29.30%, between 2010 and 2018. During this time, Illinois raised the state income tax twice to fund this out-of-control spending. Further, just last year state lawmakers hit taxpayers with 20 new tax increases including the doubling of the gas tax, vehicle registration fee hikes, and the increase of online sales taxes. Even with all these tax increases the state still had an $8 billion budget deficit and an unfunded pension liability over $137 billion prior to the Covid-19 pandemic.

As the Illinois Policy Institute points out, for Democratic lawmakers to fully finance all of the Governor’s campaign promises and plug budget holes, a typical middle-class family could end up paying $3,500 more in income taxes. Even Gov. Pritzker admits that “there’s certainly no guarantees” that the amendment would protect middle and lower-income Illinoisans from future tax hikes.

The governor’s claim that there’s certainly no guarantees is correct. Take, for instance, Connecticut—the one state that has swapped out its flat income tax for a progressive income tax in the last 30 years. Nutmeg State lawmakers touted the progressive income tax as a way to fix state finances, address inequality, and promised spending restraint. However, that’s not what happened. It instead, cost the state’s economy over $10 billion, 360,000 jobs, and middle class families have seen their income tax rates climb over 13% and their property tax burden increase by more than 35% since 1999—the year that the personal income tax was first collected. As a result of these failed policies, Connecticut dons the 6th highest outmigration rate in the nation.

If voters need another reason to reject a progressive income tax structure with the higher rates set by SB 687, it’s worth remembering that it would kill jobs and small businesses by imposing the second-highest business tax rate in the nation. Under the Governor’s Fair Tax Plan, the corporate tax rate would rise from 7% to 7.99%, and when you take into account the 2.5% replacement tax already imposed on Illinois corporations, the total taxable rate is 10.49%. In 2018, the U.S. Bureau of Labor Statistics reported that Illinois’ private sector job growth ranked 46th out of 50 states. With the coronavirus pandemic looming over the heads of local businesses, many of which are on the brink of bankruptcy, the proposed Illinois income tax hike would exacerbate the financial hardships of a dilapidated economy.

A study conducted by the University of Illinois indicated that the state of can expect more than half a million full-time job losses and tens of billions of dollars in lost income over the next year as a result of the novel coronavirus. Illinois had already lost a record 850,000 residents over the last decade. By instituting another financial requirement on employers, this would be the last straw for thousands of small businesses and large employers, driving them to leave the state.

Giving Illinois lawmakers a blank check to spend billions of taxpayer dollars however they please will not provide a different outcome this time. The only way to address the state’s financial crisis is by reining in/reforming government spending in a way that taxpayers can afford. If taxpayers in Illinois truly wish to take a stand for fiscal responsibility and accountability, they should vote ‘NO’ on the graduated income tax amendment this November.

Photo Credit: Alan Cleaver

Radical Ballot Measures Promise to Change Elections Forever

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Posted by Sheridan Nolen on Monday, October 5th, 2020, 4:48 PM PERMALINK

Radical campaign and election reform ballot measures will appear on the ballot in Massachusetts, Florida, and Alaska.  

These measures are signs of a larger trend driven by left-wing activists to drastically transform elections. They include “jungle primaries” that place all candidates in one primary, eliminating parties from the equation, and potentially leaving general election voters to decide between candidates who are very similar. Also on the table is ranked choice voting and free speech-chilling disclosure requirements that violate citizen privacy.  

Read more from ATR's 2020 State Ballot Measure Guide here.

These measures ultimately are likely to lead to higher burdens for taxpayers and less accountability for elected officials. Let’s take a look...   

Massachusetts voters will decide on Question 2, a state constitutional amendment that would enact ranked-choice voting for primary and general elections for state executive officials, state legislators, federal congressional representatives, and certain county offices.  

Ranked-choice voting is a method in which voters would rank all candidates for an elected position – of every party – according to their preferences. If a candidate received greater than 50% of first-preference votes, that candidate is automatically declared the winner.  

However, if no candidate receives that threshold of votes, the candidate receiving the fewest first-preference votes is eliminated. The second-preference choices indicated on ballots are then tallied as voters’ first-preference choice in the following round.  

This process is continued until a candidate wins a simple majority (50% +1) of the vote. If there is a tie for last place, the candidates’ support from earlier rounds will be compared to determine who should be eliminated.  

Currently, Massachusetts uses a plurality voting system (each voter casts their vote for a single candidate; the winning candidate is who wins the most votes) and semi-closed primaries (independent voters may vote in the partisan primary of their choice, but party affiliated voters must stay in their party).  

In a ranked-choice voting system, an individual's vote for their clear first choice can end up not mattering and their vote might end up being cast for a candidate they ranked far below their first choice. In fact, many voters choose to only list their top two or three candidates, especially when there are candidates for who they would never consider voting.  

Unfortunately, simply choosing to omit these candidates could hurt a voter’s chances of their ballot being counted in future rounds of tabulation through ballot exhaustion. In turn, candidates are elected that were not the first choice of the majority of voters, but only a majority of all valid votes in the final round of tallying. It’s possible that a winning candidate will fall short of an actual majority in a ranked-choice voting system.  

Florida’s Amendment 3 would scrap the state’s current closed primary elections in favor of a “jungle primary” system for state legislators, the governor, and cabinet (attorney general, chief financial officer, and commissioner of agriculture). In a jungle primary, all candidates – regardless of party – compete in one primary. The top-two candidates with the most votes would advance to the general election.  

This dysfunctional system is so radical that both the Republican and Democratic parties in Florida oppose it and would likely result in greater burdens for Florida taxpayers. In primarily solid Republican or Democrat areas, for example, voters in the minority party could be deprived of a general election vote choice because turn-out for the majority party was so high. Making the primary election the far more important and decisive election promises to confuse voters.  

While the Massachusetts and Florida ballot measures are a recipe for disaster, Alaska’s Ballot Measure 2 takes the cake.  

Ballot Measure 2 would replace standard party primary elections with open top-four primaries for state and federal offices and establish a ranked-choice voting system for the general election. In other words, all candidates – regardless of political party – for a particular elected office will appear on a single primary ballot. The top-four candidates will advance to the general election where ranked-choice voting will be used to determine the final winner.  

In addition to changing the electoral system, Ballot Measure 2 could also curb free speech in the electoral process. If the measure is passed, the personal information of individuals who donate over $2,000 in campaign contributions will be disclosed. Consequently, individuals might withhold donations to their preferred candidates or causes to evade public retaliation.   

These upheavals threaten to cause chaos in elections and make it more difficult for hard-working taxpayers to speak out and hold their politicians accountable.    

Photo Credit: justgrimes

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Oklahoma Ballot Measure Would Fix Harmful Sentencing Rules & Save Taxpayer Dollars

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Posted by Sheridan Nolen on Tuesday, September 8th, 2020, 1:01 PM PERMALINK

This November, Oklahoma voters have the opportunity to enact overdue change to the state’s criminal justice system that could save taxpayers up to 186 million dollars.  

Earlier this month, Gov. Kevin Stitt directed the State Election board to place the measure, State Question 805, on the general election ballot. SQ 805 would eliminate sentence enhancements which automatically add extra years to prison sentences for repeat nonviolent offenders.  

Oklahoma was ranked the worst state for incarceration rates in the U.S. in 2018. That same year, the Sooner State was dubbed “the world’s prison capital" for also having the highest rate of incarceration in the world. 

While Oklahoma has since slightly improved to 47th in incarceration nationally, passing SQ 805 is urgently needed to help the state make more substantial progress in the right direction. Because sentence enhancements are used in four out of every five cases Oklahoma, it is estimated that the passage of SQ 805 should reduce the state prison population by 8.5% over ten years.  

Sentencing enhancements have failed to serve public safety, as they penalize offenders beyond what is reasonable for their offense. It also subjects offenders to extended incarceration which does damage to their ability to find work and become productive members of society upon their release.  

“Data shows that in the case of incarceration versus remaining in the community, there was a 7% increase in recidivism for those offenders who were in prison. Researchers also find an increased likelihood that lower-risk offenders will be more negatively affected by incarceration,” states Families Against Mandatory Minimums (FAMM).  

On top of SQ 805 having the potential to be a ground-breaking moment in the Oklahoma’s criminal justice reform process, it also has the capability to yield taxpayers a significant amount of savings.  

According to a fiscal analysis done by the Oklahoma Council of Public Affairs, eliminating sentence enhancements for nonviolent offenses could reduce state expenses anywhere between $45 million and $186 million over the next 10 years. The wide range of fiscal savings depends on the rate at which the state would respond to a lower prison population at its 16 state institutions. Without any facility closures, the passage of SQ 805 would save $45 million. On the higher end, closing several state institutions could result in savings as high as $186 million. A reasonable projection, however, is that Oklahomans would save about $142 million, assuming that the state would be able to close several aging state prison facilities. 

Oklahomans have the chance to improve their criminal justice system and save taxpayer dollars in the process. SQ 805 would directly impact the lives of thousands of people who were victims of overzealous sentencing rules, making the passage of this ballot measure a critical step towards more justice and a more free state.  


Photo Credit: Charles Duggar

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