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Municipalities Want Uniformity, Say HB5 is Tax Reform

Representatives from all over Ohio told the House Ways and Means Committee Tuesday that, while they support uniformity of Ohio's municipal income tax codes, they believe HB5 (Grossman-Henne) is really tax reform and tax reduction disguised as a uniformity bill.

Those testifying in opposition all had similar messages about the bill, saying that adding HB5 on top of Local Government Fund cuts and the loss of the estate tax would be unfair and would interfere with local control. They said HB5 would lead to loss of revenue.

Among those testifying were Eric Hanson, city manager of Mason; Lakewood Mayor Michal Summers; Jack Jensen, executive director of Dayton First Suburbs Consortium; Susan Cave of the Ohio Municipal League; Thomas Moeller, city manager of Madeira; Melinda Frank, city of Columbus income tax administrator; Lynette Ozanich, chief tax clerk of the city of Brunswick; Bratenahl Mayor John Licastro, who also serves as president of the Northeast Ohio Mayors and City Managers Association; and Bay Village Mayor Deborah Sutherland.

Hanson said while Mason is open to the discussion, the implications and infringement of state government on municipal issues in HB5 "far overreaches the original intent." The bill will encroach on his city's ability to self-govern, and will be in conflict with charter amendments approved by Mason voters, he said. Hanson later told the committee that local voters approved a new amendment last fall which would fund fire services by increasing the city's income tax, while those paying property taxes would get a credit. He said the city is concerned about HB5 jeopardizing the ability of the city to offer that credit.

Summers, who said he also serves as chief executive of Summers Rubber Company, questioned who is being helped by the law because employers would still have to provide the same amount of data. He also noted studies and interviews that indicate businesses aren't considering the tax burden when deciding where to locate.

"Let's not confuse uniformity with tax reform and tax reduction," he said, saying he fears the bill mixes those ideas.

Witnesses also complained about the proposed tax policy board. Summers suggested the power of the bill be limited in scope to uniformity and be sunset after two years. "It is a very dangerous delegation of power," he said.

Jensen highlighted an agreement between members of the Dayton First Suburbs Consortium in order to be more uniform. He said HB5 goes beyond that, pointing to provisions such as the net-operating loss carry-forward provision that requires municipalities to employ a period of five years. Cave noted that more than 200 do not have any carry-forward period.

Cave said the Ohio Municipal League gave suggestions on how to address issues of uniformity earlier in the process of creating HB5. Other than the net-operating loss provision, she said the "throwback" rule and the "occasional entrant" rule that extends when you can account for an employee from 12 to 20 days will also create revenue problems for cities.

Moeller noted all the difficult decisions the city has already made, and said he estimates a loss of $50,000 in revenue under the bill.

"We ask you to not make any political decisions that will make our resources even scarcer than they already are," he said.

Members of the committee asked witnesses to provide them with as many figures as possible, with Rep. Nan Baker (R- Westlake) asking Cave for specific numbers of what cities could lose under the bill.

Rep. Terry Boose (R-Norwalk) asked a number of witnesses what types of unfunded mandates the bill would impose on them. Hanson said it would force his city to hire a tax compliance officer. Cave pointed to the five-year loss carry-over provision, calling it a mandate to give up revenue.

She told Rep. John Barnes (D-Cleveland) there are a number of areas in which municipalities have reached agreement with sponsors and supporters of the bill. She said discussions are continuing. 

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