To the editor:

I write to correct some misinformation conveyed in the column this week by Policy Matters about Governor Kasich’s plan to centralize and streamline the municipal income tax on business income.

That column echoes a campaign of misinformation being waged by municipalities across Ohio working to defeat a proposal the governor made that will advance the best interests of all Ohio, including cities and villages.

The goal is to remedy a big problem for Ohio businesses that are required to file tax returns in every city where they earn income.

Some of us complain about having to file one municipal (or state or federal) income tax return. Imagine having to file fifty, or hundreds of returns with different municipalities, all having their own tax rates, rules and filing requirements.

That is the compliance nightmare that businesses face in Ohio. Many report that it costs them more to file all those returns than the amount of tax they owe.

The governor’s proposal would have businesses file just one form in one place and be subject to one consistent set of rules regardless of how many cities in which they do business. The Department of Taxation would process the tax and send all payments on a quarterly schedule, plus interest, back to the respective city or village, minus a 1% administration fee.

The column claims businesses can file returns with a third-party administrator. That’s true but many cities still require forms to be filed separately with the city. As well, cities pay from two to five times higher costs than having the state collect and process the tax. The state’s low fee, in fact, will save cities across Ohio more than $9 million.

The column claims that municipalities would lose control over their major source of revenue. Not true. Cities would control tax rates and credits, and retain responsibility for collecting more than 85% of their municipal income tax revenue.

The column trots out the specter of the state eliminating the local profits tax, just as the state repealed the corporate income tax in 2005. Two problems with that "concern:" Only the author and some municipal officials has mentioned eliminating the local tax, and by the way, the commercial activity tax replaced the corporate income tax because it had become riddled with loopholes and fewer and fewer companies were paying the tax.

The governor has made a “pro-business” proposal that would enhance the business climate in Ohio and is being supported by nearly every major business group in the state. It would also cut costs for almost all municipalities and leave them with more revenue to support services in their communities.

There is no valid reason for municipalities to cling to their obsolete and counterproductive tax system. Ohio must continue improving its economic environment to compete for new businesses and jobs.

Sincerely,
Joe Testa
Ohio Tax Commissioner