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Bill To Overhaul Municipal Income Tax System Moving

State lawmakers are likely to vote in the next few weeks on a controversial bill to overhaul the municipal income tax system used by hundreds of Ohio cities. Many ities have opposed the measure. Ohio Public Radio's Karen Kasler reports.

For more than four years, lawmakers, lobbyists and researchers have been debating changes to the municipal income tax system – based on stories like this from electrician and business owner Jack Buschur of Minster in western Ohio. 

“There are 41 different forms, and 41 different municipals or villages or cities that’s represented in this stack. Every one of these is a different type of form, takes different type of work to fill it out, and actually we have to pay our accountants to do it, even if we don’t have to owe money.”

Buscher was at the Statehouse in March 2012, as the municipal income tax reform bill started its journey through the legislature. It hasn’t moved much since it passed the House a year ago, largely because of big opposition to it from officials in cities around the state. But its Republican backers want it signed into law by the end of the year. There are many complicated changes in the bill, which seeks to be both friendly to business by making city tax paperwork simpler, but also to be revenue-neutral to the cities. But as the bill has progressed, its sponsors have admitted that may not be possible. And that, along with other cuts that cities have weathered in recent years, adds up to a big problem, says Kent Scarrett with the Ohio Municipal League. 

“When you couple those reductions in some of these reform areas with the cuts to the local government fund that was about $5.5 million, the repeal of Ohio’s estate tax that was about $300 million to municipalities and then some other changes in state revenue sharing, you couple those together, and those are significant losses of revenue.”

Greg Lawson speaks for the Buckeye Institute, a conservative think tank that has argued for the kinds of items in this bill – and more changes that it says will help businesses and taxpayers. He says a potential loss of revenue to cities from these reforms is not enough of a reason to kill the bill. 

“I think it’s incumbent on cities to really make that case and candidly, I think there’s some cities probably can make that case.  I think there’s many cities that are going to have to explain other areas where they spend money on, and taxpayers have every right to say, ‘spend less here to fund my fire and police services’.”

Lawson says that’s an example of local control – which cities are saying they feel they’re losing with requirements that they submit to all these changes. But Scarrett says the state’s overall economic health depends on vibrant local communities, and these changes won’t help that. 
“We’re going to see the pressure put on locals, as it is now, to either provide less services and explain that to their constituents, or ask for greater revenues. And I’ll tell you that of the 57 ballot issues that this previous election, only a third of those passed when we’re asking for greater revenues to meet the service demands that are being requested.”

But Scarrett and Lawson do agree on one thing – that the bill could do more to close loopholes that Scarrett says were generated by state lawmakers and cost cities money. Lawson says that would make the system fairer and more competitive and allow tax rates to be lowered.