Ohio Municipal League
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SPECIAL LEGISLATIVE BULLETIN

August 28, 2002

PLEASE CIRCULATE THIS BULLETIN TO YOUR COUNCIL, DEPARTMENT HEADS & STAFF

Two Tax Study Committees Looking at Ohio’s Overall Tax System

Should municipal officials be concerned? The answer clearly is Yes. Here are some reasons why.

1) Both groups are looking at both state and local taxes with specific mention of the municipal income tax.

2) The state of Ohio’s revenue situation is less than favorable.

3) Various interests groups will see these forums as opportunities to make changes to state and local taxes that otherwise might not happen or have failed in the past.

Committee to Study State and Local Taxes

This committee was created by SB 261 (one of the session’s budget correction bills). They are to issue a report by March 2003. The committee meetings thus far have been a series of "seminars" with speakers comparing Ohio’s tax system to others in the U.S. William Fox, Professor of Economics, University of Tennessee, spoke on the characteristics of a good tax system including revenue generation, fairness, simplicity, neutrality and competitiveness. He indicated that Ohio is below the national average in tax burden on combined state and local taxes. He also commented that taxes are not a dominate factor in economic development. Carol Bessey and Fred Church from the Ohio Department of Taxation gave an excellent overview of all Ohio taxes and the revenue they raised. Troubling, however, was the inference that reimbursements to local governments for lost local tax revenue due to state initiated reductions are state aid. Richard Levin, consultant, presented a two-part discussion of past tax studies in Ohio. He includes listings of what the various recommendations had been and which ones have been implemented.

Robert Tannenwald, Assistant Vice President and Economist, Federal Reserve Bank of Boston made a presentation entitled "Are State and Local Revenues Systems Becoming Obsolete?" His focus was primarily on the state tax and property tax and the erosion of both because of the shift to a more knowledge based and service oriented economy. Harley Duncan, Director of Federation of Tax Administrators, talked about national and regional comparisons. His prepared charts indicated that Ohio is below the national average on all state and local taxes as a percent of personal income. Legislative Service Commission presented a statistical comparison of Ohio’s tax system to other states.

Weekly meetings of this committee will continue into the fall on Tuesday mornings in Columbus. Members of the committee are: Thomas Zaino, Ohio Commissioner of Taxation; Bruce Johnson, Director, Ohio Department of Development; Tom Johnson, Director, Office of Management and Budget; Senator William Harris; Senator David Goodman; Senator Eric Fingerhut; Representative Sally Kilbane; Representative Kirk Shuring and Representative Ed Jerse.

Related Events -

Wednesday, OML staff met with Tax Commissioner, Tom Zaino to discuss the issues before the committee. We expressed our interest in preserving the integrity of the municipal income tax. Mr. Zaino indicated a willingness to work with us and include OML in the process. He did, however, share with us his interest in easing the compliance burden business faces with the net profits portion of municipal income tax. He indicated that in his view state administration and collection of that portion of the municipal tax would be a desirable alternative especially as to competitiveness. The League raised a number of concerns with that approach. Please share yours.

For your information the Ohio Chamber of Commerce has circulated a questionnaire to their members asking them to provide examples of negative experiences with the municipal income tax.

House Select Committee on Tax Reform

This committee has been holding hearing hearings around the state during August. They have heard from various business interests, consultants and other interested persons. Of particular interest is the most recent hearing in southwest Ohio where former State Representative Don Mottley testified extensively on the municipal income tax. His theme can be summed up as "uniformity, uniformity, uniformity" in individual ordinances, administration and collection.

Members of this committee are: Representatives Kilbane (Chair), Allen, Blasdel, Brinkman, Brown, Callendar, Carano, Coates, DeBose, DeWine, Gilb, Hartnett, Hoops, Latta, McGregor, Niehaus, Olman, Sykes and Widowfield.

What Should Municipal Officials Be Doing

All of the seats in the Ohio House are up for election this November as well as one-half of those in the Senate, not to mention the Governor. Look at this as an opportunity to make sure the candidates know the following:

1) how important municipalities are to the overall economy and well being of the State of Ohio.

2) how important the municipal income tax is to the provision at the local level all of the municipal services.

3) how important state revenue sharing through earmarked state taxes is to all local governments.