By JAN LARSON McLAUGHLIN
BG Independent News
After losing chunks of state funding over the last decade, Bowling Green officials don’t plan to sit still as more local funding is siphoned away.
Municipalities across Ohio are suing the state over an income tax collection change that city officials call unconstitutional. The change would allow businesses to file income tax returns with the state rather than with the city where the businesses are located.
The Ohio Department of Taxation would process the returns and distribute the money back to local governments – but only after pocketing a 1 percent fee for the service.
“We can do it in-house for under that amount,” Bowling Green Assistant Municipal Administrator Joe Fawcett said.
The change is set to take effect Jan. 1.
State officials have said the change will save businesses time and money by streamlining the process of collecting more than $600 million in municipal income taxes paid by Ohio businesses each year. The change is also being promoted as a way to make the state more friendly to businesses that have locations in more than one Ohio community.
But municipal officials have said giving up the processing of tax returns will result in a loss of accountability and personalized customer service for businesses.
Fawcett added that the change will create confusion for businesses, and could risk the positions of four employees in the city income tax department.
“We have a staff that does this. What would we do with those people,” Fawcett said.
Bowling Green officials considered joining other municipalities in the lawsuit against the state, and were mistakenly added to the list of complainants. However, Fawcett explained that the potential cost kept the city from signing on – similar to the reasoning for the city not joining other municipalities in the motion to intervene on the Nexus pipeline project.
“The cost associated with litigation was enough that we chose not to go that route,” Fawcett said.
But at last week’s meeting, City Council voted unanimously to formally support other Ohio communities that are part of the lawsuit against the state collecting local income taxes. Council president Mike Aspacher expressed his appreciation to council for passing the resolution.
“It’s a local tax and it should be collected locally,” Fawcett said.
Earlier this year, Bowling Green and Perrysburg officials expressed their concerns about the state taking over collection of income taxes from businesses.
Council member Sandy Rowland talked about the loss of state funding in the last few years, “and now comes another potential debacle with city government funding,” she said. “This would pretty much bring Bowling Green to its knees.”
Perrysburg Finance Director David Creps also spoke out against the business income tax change, explaining that local government can handle the issues in their communities more efficiently than Columbus can.
“We can solve these problems instantly,” Creps said.
Businesses will have to opt-in to be part of the state collection program, Bowling Green City Finance Director Brian Bushong said. Once businesses opt-in, they are part of the state program for five years, he added.
Even if few local businesses sign up for the state income tax collection, the concern of city officials is that this move could be just the beginning.
“I think it’s the foot in the door,” Bushong said. “If they do this for businesses,” what will stop the state from taking a bigger percentage of the taxes.
Fawcett agreed that the toe in the door could be dangerous.
“There’s certainly that. What’s to stop them from saying they want 1.5 or 2 percent of the income tax,” he said.
Each municipality will be required to grant the state the authority to administer the centralized tax collection before Jan. 31, or risk losing its income taxes altogether. Under the new plan, municipalities also won’t be allowed to check returns filed with the state for irregularities nor will they have easy access the state’s data.