GENEVA — The numbers on Jim Pearson’s spreadsheet add up to a negative.
Line after line — the Local Government Fund, $213,000; the estate tax, $74,000; tangible personal property tax, $109,000 — shows the sweeping state cuts to the city’s precarious budget, and it isn’t going to get any easier, he said.
Pearson, who serves as the city manager in Geneva, said there is another obstacle looming on the horizon for local governments as state legislators mull House Bill 5, which proposes uniformity measures for municipal income tax by way of unfunded mandates and a big financial hit to the city’s general fund.
“The long-term purpose of House Bill 5 is state oversight of municipal income tax operations,” Pearson said. “That could lead to a future push for forced state centralized collection of municipal income tax.”
If passed, the bill would require cities and villages to repeal their income tax ordinances and adopt the state code to provide uniformity in tax forms and collection. Failure to do so would result in a state lockdown for tax collection, meaning the municipalities would not be able to collect tax dollars from residents and workers.
Pearson calls the local tax “the single largest revenue source for the city.”
“It provides essential municipal services,” he said.
City Council members recently passed a resolution opposing the proposed legislation, which notes the bill would reduce the municipal income tax to all Ohio municipalities.
The Ohio Municipal League executive director Susan Cave agrees with Geneva’s lawmakers.
“(It) will result in tremendous hardships through significant reductions in revenues and loss of critical local control for Ohio cities and villages,” she said.
Cave said uniformity of tax law and tax forms is not at question.
‘Let there be no mistake,” she said. “Our members are all for greater uniformity in the administration of the municipal income tax. The product in no way reflects what we would consider to be a responsible approach to achieve balanced uniformity, with revenue impacts to local revenues kept to a minimum.”
Cave said the bill hinders local governments by eliminating local control of income tax ordinances. This control of administration, enforcement and reporting is a path toward a time when the state would collect all taxes in the state and issue them back to local governments as they see fit.
“This is a clear road map to future centralized collection of municipal income tax revenues by the state,” she said.
Cave said the bill adds “a layer of bureaucracy” as a municipal tax policy board is appointed, which will expand the “size and scope” of state government.
Big dollars could be lost at the local level, Cave said, as the 12-day occasional entrant treatment rule, which allows non-resident workers to labor in the city or village for 12 days without taxation, to work for 20 days without taxation.
The bill would also throw a wrench in a city’s ability to tax off-site or internet sales made by local businesses, including catalogue sales and electronic transactions.
Small governments would also be unable to enforce tax collection locally, Cave said, and would require each community to employ a “problem resolution officer” to oversee tax administrators.
Pearson said state legislators should focus on the real problem at hand — restoring funding to small governments across the state.
“The Ohio General Assembly should focus on restoring previous funding levels and focus on correcting its multitude of programming problems and customer service issues,” he said in the resolution, “to make that tool less cumbersome.”
Fixing those problems, Pearson said, would make tax collection more relevant to municipalities, businesses and individuals.
“It would make it a simple, generic, one-stop method of filing local business income tax returns in one location,” he said.