To the editor:
Sidney mayor’s comments are misleading on the municipal tax reform.
Sidney Mayor Mike Barhorst proclaimed recently that my editorial about Governor Kasich’s pro-business proposal to centralize the municipal tax on business income was full of misinformation, mischaracterization, and misrepresentation.
The mayor’s comments are consistently inaccurate. Let’s look at just some of the ways.
Mayor’s claim: “Not one (business) ever complained to me about filing local tax returns.”
RESPONSE: Members of the Ohio Tax Reform Coalition, representing 31 statewide business organizations are complaining — loudly — about the system for filing local taxes. The Ohio Chamber of Commerce, Ohio Society of Certified Public Accountants, Ohio Manufacturing Association, even the Ohio Newspaper Association all support the Governor’s proposal to centralize collection of the municipal net profits tax to address long-standing problems (that are) costly and cumbersome (for) Ohio businesses.
Mayor’s claim: “The Ohio Business Gateway is so broken that it will cost millions of dollars to make it fully operational.”
RESPONSE: The Ohio Business Gateway (OBG) is the state computer system through which more than four million tax filings and more than $17 billion of payments were made last year. Does that seem broken? The OBG is currently capable of and would fully accommodate the centralized filing of the municipal net profits tax when scheduled to begin in 2018. OBG, as happens with all technology, is now being upgraded as part of a project called OBG 3.0, but the state administration of the municipal net profits tax is not dependent on that upgrade. Complaints about the functionality of OBG are a smokescreen.
Mayor’s claim: “There is no basis in reality for expecting that the city of Sidney will save any money from this change.”
RESPONSE: The Ohio Department of Taxation has estimated that the more than 600 cities and villages in Ohio would gain more than $9 million in income tax revenue because the state’s 1 percent administration fee would be lower than all but four cities out of 96 analyzed. The mayor, without explanation, turns that $9 million savings into a potential $9 million revenue loss for municipalities. Then he offers up estimation that Sidney will lose $51,000 a year because of the state’s 1 percent fee. The state’s 1 percent fee would be about $18,000 for collecting approximately $1.8 million in city tax revenue. A final item, the mayor doesn’t mention how much it costs the city to collect the tax. I expect it’s quite a bit more than $18,000.
Mayor’s claim: “In fact, the state would charge an unconstitutional 1 percent for administration … “
RESPONSE: Again, with the unsupported assertion. The Department of Taxation, by state law, charges local governments an administration fee to collect their sales tax, school district income tax, municipal income tax on electric light and telephone companies and a few other taxes. The state constitution clearly gives the legislature the authority to limit municipal tax and enact a state fee to cover the cost of administration.
Mayor’s claim: “The state of Ohio conducts no enforcement activity.”
RESPONSE: The Department of Taxation employs 360 people whose sole responsibility is enforcing tax laws. They do audits, work compliance programs and conduct criminal investigations. They recovered nearly $600 million in tax owed but not paid last year. More will be added if this proposal is adopted.
Mayor’s claim: “Written into the law is the fact that these funds would no longer be considered local tax monies, but rather state tax monies.”
RESPONSE: Just like the other local taxes the state collects for local governments, the money belongs to them and is distributed accordingly.
Joe Testa, Ohio Tax Commissioner
