Avon Lake officials reject state income tax collection

Avon Lake

By Nicole Hennessy

Avon Lake City Council officially approved a resolution opposing the proposed state-mandated centralized collection of net-profit income taxes — a controversial income provision buried in the state’s 2017-2018 budget.

Several cities, including Lorain and Elyria, have adopted similar resolutions.

Sen. Gayle Manning said she won’t have the budget in front of her until May 1, but she’s been hearing from many communities that this is a concern.

“I’m sure I’ll hear from more when the budget comes my way,” Manning said, noting she’s yet to hear many business owners voice support for the proposal.

Council President Martin O’Donnell discussed several of his concerns Monday, other council members nodding along in support as he spoke.

Putting the magnitude of this tax into perspective, O’ Donnell said the state would be collecting $600
million and charging municipalities a 1-percent administrative fee.

Ohio’s Regional Income Tax Agency (RITA), which would still collect all other taxes, currently charges
municipalities 1.73 percent.

Steve Presley, Avon Lake’s finance director, who also sits on RITA’s board, said this percentage does dip lower from time to time.

Many fear the state’s 1-percent fee will gradually increase.

“We’ve already lost about $1.3 million,” O’Donnell said, referencing massive state cuts to the Local Government Fund.

The state also eliminated the estate tax, which O’Donnell said has cost Avon Lake $600,000. A tangible personal property tax has also been eliminated.

To train employees and set up the software necessary to handle the tax collection, O’Donnell said the state would have to fork out $9 million.

“Cities would also lose the right to audit companies,” he said.

In addition to concerns that the 1-percent fee would increase, city officials have commented that they fear the state would eventually attempt to collect the entire income tax.

“You’re talking about $4.7 billion in revenue,” O’Donnell explained.

“It’s a money-making process for the state, for certain.”

In addition to the 1-percent fee it will be collecting, the state could potentially make money through tax collection by accruing interest on any accounts the funds are kept in.

Manning agreed there could be more support found for centralized net-profit tax collection if there were a provision that a percentage of any interest accrued must go to schools or directly to municipalities, as well as a provision that locks the administrative fee at 1 percent.

This would require the item being removed from the budget and reintroduced to legislators as a stand-alone bill.

“The problem with having it in a budget … if you don’t vote for the budget, you’re not voting for money for the schools, you’re not voting for money for mentally ill and all those programs with the opiates, so what you’re hoping is that something that is this controversial is pulled out,” said Manning, who is interested in hearing more from the business community on the matter.

“I’d rather see it in a separate bill, if anything, so that people can weigh in on both sides.”

The state’s argument for centralized collection is that the new collection website will streamline the process for businesses and cut down on filing costs.

Presley argues this couldn’t be further from the truth, as taxes would need to be filed through two different entities: the state and RITA.

Councilman John Shondel, who has been vocal in his opposition to this matter, as well as his disappointment with Republican leadership in Columbus, has stated several times that he sees this proposal as a slippery slope.

“I just guarantee you … that the logic of the state would be, ‘Well, now that (businesses) have to file with two different agencies, we’ll make it easier. You can just file with us,’” Shondel said.

“The closer the money stays to where it’s collected, the better. We all know that when you send money up to Washington (D.C.), when it takes all the tolls going up and coming back, the best you can get is about 60 or 70 percent, if you’re fortunate.”

Curtis Weems, a Republican precinct official who’s active in local and state politics, had a different view than that expressed by many city officials.

“I can’t take Steve Presley’s concerns seriously considering he is the full-time finance director for two cities at the same time (Avon Lake and Olmsted Falls),” said Weems.

“Plus, he is compensated for sitting on the RITA Board of Trustees. Seems to me that he has a bias given there are no assurances that RITA can’t raise its collection rate or change the timing of its payments to communities.”

Shondel has continued to speak out against this and other perceived government overreaches as violations of the Ohio Constitution’s municipal home rule authority.

Reiterating comments O’Donnell made regarding cuts in municipal funding, Shondel said he plans to continue speaking up.

“We’ve never really said enough about the fact that the governor of the state of Ohio has bragged about balancing his budget, but at the same time there was this huge cut in local government funds, and it may not equal the amount of the budget surplus, but it certainly made a big part of it,” he told his fellow council members Monday.Avon Lake

Contact Nicole Hennessy at nicohenness@gmail.com

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