COLUMBUS — Toledo Mayor Paula Hicks-Hudson argued Tuesday that the city can do a better job of collecting the local business income tax as she urged lawmakers to reject Gov. John Kasich’s proposal to collect the tax at the state level.
She told a House Finance subcommittee that, despite arguments from the state to the contrary, the plan would cost the city $200,000 a year in added fees, make it more difficult for the city to conduct timely audits, and be less convenient to taxpayers.
“Government at the local level is probably the closest to the individual and to that business... Those actions are being monitored at the local level more quickly, more efficiently,” she said.
She had just come from a meeting with nearly 30 mayors making up the new Ohio Mayors Alliance that lobbies for city interests in Columbus as lawmakers craft a new two-year budget.
“We are speaking bipartisan with one voice, and we don’t think this is a good idea,” she said. “At the local level I have not heard any municipality that collects taxes that finds this is a favorable action. …”
The city collected $20 million from the business tax in 2016 out of total revenue of $175 million.
Mr. Kasich’s two-year budget proposal pending in the House would have the state collect municipal taxes on business income and then remit the revenue to the sometimes multiple taxing entities where they do business on a quarterly basis. The state would slice a 1 percent fee off the top.
“Instead of taxpayers filling out 18 different returns, they’ll only have to fill out one state return,” Rep. Jim Butler (R., Dayton) said.
Toledo currently charges a 1.3 percent fee and figures it would have to fork over an additional 1 percent to the state, an estimated $200,000.
The state has argued that centralized tax collection in Columbus would be more business friendly and that 1 percent is often less than what municipalities pay to outside firms to collect the tax. Toledo, however, does not outsource the work.
Rep. Keith Faber (R., Celina), chairman of the State Government and Agency Review Committee, questioned the city’s math.
“You’re paying 1.3 percent to collect it,” Mr. Faber said. “The governor said he can collect it for 1 [percentage] point. I assume you’re not going to pay twice to collect the same money. You’re going to have some staff adjustments to adjust for that difference.”
Ms. Hicks-Hudson said after the hearing that staff would be reduced if necessary.
“We wouldn’t do it immediately,” she said. “It would have to come through attrition.”
The mayor also objects to a proposal from the governor that would require Toledo to share its tax with other taxing municipalities where a Toledo-based business also does work. The city believes the tax should go to the city where the business is located.
Finance Director George Sarantou estimated that the city would lose $60,000 to $70,000 a year because of this.
City council is expected next week to vote on a resolution from the mayor opposing the centralized tax collection plan. Council President Steven Steel said Ohio cities should be wary.
“Based on what we have seen, it seems once we lose some measure of control of the income tax, what is next?” he said after a city council agenda review meeting. “And then there is 1 percent skimming-off-the-top fee that is 1 percent now, but what about when they make it 1.5 percent or 2 percent?”
Staff writer Ignazio Messina contributed to this report.
Contact Jim Provance at: firstname.lastname@example.org or 614-221-0496.
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