BEFORE THE SENATE WAYS & MEANS & ECONOMIC DEVELOPMENT COMMITTEE
Interested Party Testimony on Am.HB 24
Wednesday – May 16, 2007

Mr. Chairman and Members of the Committee,

My name is Daniel Navin and I am the Assistant Vice President, Tax & Economic Policy, for the Ohio Chamber of Commerce. I am here today to share our thoughts on Am.HB 24, legislation that proposes one way to correct an inequity discovered in the wake of the uniform municipal income tax withholding and business net profits base established in HB 95, the biennial operating budget of the 125th General Assembly.

Ohio is one of the relatively few states that allows its cities and villages to impose a local municipal income tax on individuals and an equivalent local tax on the net profits of businesses operating in such jurisdictions. Obviously, this is in addition to a state personal income tax, a pass-through entity withholding tax, and a corporation franchise tax with a net income base, the latter of which is being phased out in lieu of the new commercial activity tax on Ohio gross receipts.

While some may regard Ohio’s home rule tradition as an unequivocal advantage vis-à-vis other states, there are costs and downsides attached to its implementation. One of those is the proliferation of smaller units of government, creating an infrastructure of government that costs Ohio taxpayers more and more to sustain every year.

Another downside to “home rule” is the fact that until 2003 (after enactment of HB 66), each of the 540+ cities and villages that impose a local municipal income tax had some unique feature or aspect of its tax code – a different withholding base, different deductions or add-backs in calculating either withholding or net profits, different apportionment formulas for determining how much income is subject to taxation in what city, and different appeals procedures and return due dates, etc. To a limited extent that is still true, but we have largely achieved uniformity of individual income tax withholding and business net profits.