Municipal income tax shift bill would harm Ohio communities
Posted October 30, 2020 in Press Releases
New analysis shows that proposed legislation to change where workers pay municipal income tax could harm communities with significant employment bases like New Albany and Solon.
A Policy Matters Ohio issue brief details new estimates from the Regional Income Tax Agency (RITA) about the effects of Senate Bill 352 and House Bill 754. However, even a loss in the millions to these wealthier communities would constitute less than 10% of municipal income tax revenues. The RITA estimates indicate that less affluent communities could be harmed the most.
“Whether a big city or small town, Ohio’s local governments provide critical services we all rely on,” said issue brief author, Policy Matters Ohio Senior Project Director Wendy Patton. “We all count on local governments to pave our roads, pick up our trash and respond to emergencies. Right now, our state lawmakers should be looking for ways to support our cities and towns, not make it harder for them.
RITA estimated the impact of the proposed change by looking at the effects of a net shift in income from 10%, 20% and 30% of employees working from home and income tax dollars following them. The estimates factored in the credits that many municipalities have for taxes paid elsewhere. The analysis provides estimates; actual impact will depend on the circumstances in each place.
Estimates under the middle, 20% net impact scenario show Jackson and Rio Grande could lose 17% and 16% of municipal income tax revenues, respectively; Cardington, 13%; Oakwood, 13%, Lodi, 12%; and Ravenna and Ostrander, 11%.
Circleville, Steubenville, Fostoria, Sandusky, Grove City, Worthington, Medina, East Cleveland and Bedford Heights could all lose more than $500,000 under the same 20% scenario. The community that may lose the most among those RITA analyzed is Youngstown, which could lose up to $9.6 million a year under the middle scenario, or 14.2% of municipal income tax revenue.
Should these estimated shifts in income tax come to fruition, communities would lose even more revenue in addition to losses already sustained during the pandemic recession. The Brookings Institution found Ohio’s big cities were among the most at-risk from the pandemic because of their dependence on municipal income taxes. In addition, state cuts and elimination of revenue sources have taken more than a billion dollars from local governments over the past decade.
“There could hardly be a worse time for state lawmakers to pass a bill that would further cut Ohio’s communities,” said Patton. “Cutting revenues for public services as the pandemic surges works against the common good.”