COLUMBUS, Ohio — Republican Ohio Gov. John Kasich is preparing to make an $800 million argument for his plan that would allow the state to process and distribute the taxes levied by cities, counties and villages on business profits.
An Ohio Department of Taxation estimate released to The Associated Press on Monday suggests that’s how much Ohio business taxpayers would save in compliance costs under the governor’s proposal.
The plan, contained in the budget bill being debated in the Ohio House, calls for the department to process the payments then return the proceeds to municipalities, with interest minus a 1 percent administration fee.
The administration plans to use the $800 million figure to push back against objections raised by members of the Ohio Municipal League, which sees Kasich’s plan as a power grab for one of the largest revenue sources municipalities continue to control.
The nonpartisan Policy Matters Ohio estimates the business-profits tax accounts for more than $600 million of the over $4.7 billion in municipal income tax revenue collected annually.
“It’s no wonder that city councils across the state have been passing resolutions opposing the tax collection proposal,” said Zach Schiller, research director for the group. “The General Assembly should be wary of this plan.”
The state estimates cities would save $9 million a year on administration, a figure the Cleveland-based think tank says its calculations show is exaggerated. Among concerns is that the move eventually could lead to the state eliminating the tax altogether.
Tax Commissioner Joe Testa said Ohio’s current system requires businesses to file taxes in every municipality where they earn income, which requires extensive tax planning and preparation. He told the AP he charged his tax analysis group about a week and a half ago to calculate businesses’ compliance costs.
“Imagine having to file 50, or hundreds, of returns with different municipalities, all having their own tax rates, rules and filing requirements,” Testa said. “We estimate that businesses are spending $1 billion a year just to file municipal net-profits tax. A centralized system for filing and payment would cut that bill by 80 percent.”
He said that figure is drawn from several data sources, including a National Society of Accountants survey of businesses’ tax preparation costs, state costs of processing other taxes and the geographic distribution of businesses’ current tax filings.
In one of many objections registered to the proposal, Cleveland City Council President Kevin Kelley wrote that the city employs a 120-member staff to collect local business and personal income taxes. He said the state’s administrative fee would cost the city $750,000.
“This is unacceptable,” Kelley wrote. “We don’t need another layer of state bureaucracy to handle our local tax collections; to skim off 1 percent of our tax revenue.”
Testa said the administration disagrees with the premise that it’s trying to take something from municipalities.
“We just see this as such a win-win,” he said. “We’re proposing taking this on. This is the state offering to use our capabilities here for the benefit of the businesses and municipalities in this state.”