Ohio Cities Don't Want State To Take Over Business Tax

Mar 27, 2017

Cities across the state impose a tax on the profits earned by local businesses. This accounts for about 14 percent of total municipal tax collections - funds that cities rely on heavily to pay for everything from police to garbage collection.

Currently, municipalities are in change of collecting this tax, and business owners are required to file and pay the tax with every municipality in which they earn an income.

Governor John Kasich, though, has proposed that the state government take control of collecting the business-profit tax. He says that the state can do it cheaper and more efficiently. 

Ohio cities say, "No, thank you."

Zach Schiller from Policy Matters Ohio says it's uncertain if this proposal will actually save money and if the state can carry out the task efficiently.

"I think the Kasich administration has somewhat exaggerated those savings," Schiller says. "It remains unclear and it depends on the city."

Ohio officials estimate that if the state collected the business-profit tax instead, they could save tax payers around $800 million in compliance costs. They say it would also simplify the process for businesses, by allowing them to file just once with the state.

While the state has pledged to distribute the money back to the municipalities, Schiller says, many city officials fear this would weaken their control over a vital funding source. Considering that Ohio continues to slash funding for local governments, Schiller says that's a pretty rational fear.

"All together, cities across Ohio are receiving about a billion dollars less a year in state money from these sources than they did just six or seven years ago," Schiller says.

The business-profits tax accounts for more than $600 million of the $4.7 billion collected every year in municipal income tax revenue.