Change in sales tax could cost county $800,000 annually
Lead Summary
By
Rory Ryan-hcpress@cinci.rr.com
Highland County commissioners may be looking at reduction in sales tax revenue of more than $800,000 annually, beginning in late 2017, due to a federally mandated change in the tax code.
Ohio Senate President Keith Faber informed commissioners Shane Wilkin, Tom Horst and Jeff Duncan of the possible changes in an Aug. 8 letter to the board.
In his letter, Faber wrote: "I wanted to take a few minutes and bring a financial and policy issue to your attention, if you aren't already aware. Since 2005 and the passage of the federal Deficit Reduction Act, the federal government has been threatening to restrict states' application of health care related taxes. Those threats are now a reality. Specifically, the feds have indicated that the application of Ohio's state and county level sales tax on MCOs (Managed Care Organizations) can no longer continue. Ohio has applied these taxes since 2009.
"For the state, the issue won't be upon us until July 1, 2017, when Ohio adopts a new two-year state budget and begins our new fiscal year. But for our 88 counties and local transit authorities, that will come right in the middle of your 2017 calendar year budget which I know you have already started preparing."
Highland County Auditor Bill Fawley said that in 2015, the county collected $807,228 in sales taxes related to MCOs.
"We would lose 12.4 percent of our tax revenues if the Legislature doesn't act," Fawley said Wednesday, Aug. 17. "It affects all counties differently. In Adams County, it's 16.9 percent, and in Vinton County, it's 22 percent."
For a statewide breakdown by county, the County Commissioners Association of Ohio has provided this link on its website: http://www.ccao.org/userfiles/Fed%20Regulations%20may%20impact%20OH%20sales%20tax.pdf.
Ohio stands to lose $558 million in fiscal year 2018 and $578 million in fiscal year 2018, the CCAO said.
According to Fawley, Ohio is the last state to come into compliance with the change. "Our budget runs through June 2017 and we're the only state still collecting this tax," Fawley told The Highland County Press.
Fawley said as he prepares county departmental budgets for next year, he will be projecting that loss of revenue from September 2017 on.
"Since our tax receipts are two months behind, we'll start noticing the cuts after September next year," he said. "I will revise the numbers to reflect this."
Fawley said it's still early and the state Legislature "may find a solution to this."
Until then, Fawley said he's taking $800,000 out of the county budget.
"We're facing a double-whammy next year if the Children Services levy (on the Nov. 8, 2016 ballot) doesn't pass and this takes effect," Fawley said.
According to Faber, "The financial ramifications both to state and county revenues are significant. Estimated state revenue losses range between $500 and $600 million per fiscal year, while our 88 counties and transit authorities face a revenue loss between $175 and $200 million per year. No solution has been offered yet, but leaders at the state level are well aware of the looming impacts on the state, counties and other jurisdictions. At this point, most seem open to finding a workable solution to mitigate the financial impact on local communities.
"Additionally, as the state's local government funding (LGF) allocation is connected to state tax receipts – there is also a corresponding negative implication to Ohio's political subdivisions who receive LGF support," Faber said.
Ohio Senate President Keith Faber informed commissioners Shane Wilkin, Tom Horst and Jeff Duncan of the possible changes in an Aug. 8 letter to the board.
In his letter, Faber wrote: "I wanted to take a few minutes and bring a financial and policy issue to your attention, if you aren't already aware. Since 2005 and the passage of the federal Deficit Reduction Act, the federal government has been threatening to restrict states' application of health care related taxes. Those threats are now a reality. Specifically, the feds have indicated that the application of Ohio's state and county level sales tax on MCOs (Managed Care Organizations) can no longer continue. Ohio has applied these taxes since 2009.
"For the state, the issue won't be upon us until July 1, 2017, when Ohio adopts a new two-year state budget and begins our new fiscal year. But for our 88 counties and local transit authorities, that will come right in the middle of your 2017 calendar year budget which I know you have already started preparing."
Highland County Auditor Bill Fawley said that in 2015, the county collected $807,228 in sales taxes related to MCOs.
"We would lose 12.4 percent of our tax revenues if the Legislature doesn't act," Fawley said Wednesday, Aug. 17. "It affects all counties differently. In Adams County, it's 16.9 percent, and in Vinton County, it's 22 percent."
For a statewide breakdown by county, the County Commissioners Association of Ohio has provided this link on its website: http://www.ccao.org/userfiles/Fed%20Regulations%20may%20impact%20OH%20sales%20tax.pdf.
Ohio stands to lose $558 million in fiscal year 2018 and $578 million in fiscal year 2018, the CCAO said.
According to Fawley, Ohio is the last state to come into compliance with the change. "Our budget runs through June 2017 and we're the only state still collecting this tax," Fawley told The Highland County Press.
Fawley said as he prepares county departmental budgets for next year, he will be projecting that loss of revenue from September 2017 on.
"Since our tax receipts are two months behind, we'll start noticing the cuts after September next year," he said. "I will revise the numbers to reflect this."
Fawley said it's still early and the state Legislature "may find a solution to this."
Until then, Fawley said he's taking $800,000 out of the county budget.
"We're facing a double-whammy next year if the Children Services levy (on the Nov. 8, 2016 ballot) doesn't pass and this takes effect," Fawley said.
According to Faber, "The financial ramifications both to state and county revenues are significant. Estimated state revenue losses range between $500 and $600 million per fiscal year, while our 88 counties and transit authorities face a revenue loss between $175 and $200 million per year. No solution has been offered yet, but leaders at the state level are well aware of the looming impacts on the state, counties and other jurisdictions. At this point, most seem open to finding a workable solution to mitigate the financial impact on local communities.
"Additionally, as the state's local government funding (LGF) allocation is connected to state tax receipts – there is also a corresponding negative implication to Ohio's political subdivisions who receive LGF support," Faber said.