Local leaders are concerned about Ohio diverting business tax revenues
Many area municipalities have not been contacted about joining a potential lawsuit expected to be filed about local businesses being allowed to file their taxes directly to the state instead of to municipalities in which they are located.
However, several area city leaders expressed concern about how this will affect future tax revenues and the ability to control their budgets.
The news rule, which was approved in the biennial state budget, allows businesses to file net-profit income-tax returns with the Ohio Department of Taxation. The state department will process the business tax return and then distribute money back to local governments after charging a half-percentage-point fee for the service.
Business owners would file returns using the Ohio Business Gateway, an existing online portal administered by the Ohio Department of Taxation.
The change is set to take effect Jan. 1.
It is estimated the move will save businesses time and money by streamlining the process of collecting an estimated $600 million in municipal income taxes.
Warren Auditor Vincent Flask is concerned local governments will lose control of money that belongs to them.
“This is another power grab at the state level,” Flask said. “If the state gets to handle the tax money first, they may be able to reduce the amount sent back to the municipalities, similar to what what done with Local Government Funds.
“Right now, we are able to have access to the funds within 24 hours after the taxes are processed. This may change the way we operate on a daily basis and how we plan bigger projects.”
About 200 communities that collect their own income taxes have discussed a potential lawsuit being considered by a Columbus-based law firm Frost Brown Todd, which could be filed against the state government next month, according to Kent Skarrett, executive director of the Ohio Municipal League.
“Communities are concerned about the loss of local control,” Skarrett said. “Under the state plan, the taxing communities are not able to audit the businesses that send their taxes to the state. We are talking to