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Cities dispute Ohio’s power over local taxes

Governor John Kashich’s two-year budget plan, which allows business owners to file taxes with the state of Ohio rather than their city of residence, is being challenged by a group of Ohio municipalities. Over 100 towns and cities are filing suit in an attempt to block several of the budget bill’s tax provisions.

The coalition of municipalities argues that the House Bill 49 violates the Home Rule Amendment of the Ohio State Constitution. The amendment prohibits the state from overriding the powers of local governments such as towns, cities and villages.

According to the lawmakers responsible for the bill, the tax provisions will make it easier for Ohio-based companies who do business in more than one municipality to file taxes. Local governments, however, aren’t so sure. The lawsuit contends that House Bill 49’s tax provisions would strip cities and towns of their authority over income tax and would severely harm local budgets.

Taxes and local budgets

The dozens of towns and villages that are contesting the bill argue that it strips important authority from municipalities. They claim that the ability to administer, receive and audit profits from taxes is a crucial power for local governments. Many towns rely heavily on profits from local taxes and fear that their general operating budgets could take a huge hit. Annually, over $600 million dollars from taxes goes to local governments; under the new bill, however, that revenue would go to the state.They further claimed that it would negatively impact state and local taxpayers.

Streamlining taxes for businesses

The lawmakers responsible for the tax provisions in House Bill 49 contend that the provision will make it easier for many companies who do business in more than one city to file taxes. Under current Ohio tax law, filing taxes with multiple municipalities can become very complicated for businesses, while filing with only the state may significantly streamline the process.

House Bill 49’s municipal income tax provisions went into effect on September 29th. As of yet, they are still in place—whether the lawsuit will effectively challenge them remains to be seen.

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