Tax ruling not good for cities

Staff report

COLUMBUS (AP) — A judge has upheld an Ohio law that allows the state to collect municipal business-profit taxes from cities, counties and villages.

At issue is a move last year by Republican Gov. John Kasich to streamline a system that required businesses to file taxes in every municipality where they earn income, requiring extensive tax planning and preparation.

The Ohio Department of Taxation estimated business taxpayers would save $800 million in compliance costs under the plan.

Cities sued last year, calling it a power grab by Kasich for one of the largest revenue sources that Ohio municipalities continue to control.

Franklin County Judge David Cain ruled Wednesday, Feb. 21, the collection is constitutional.

Sidney Mayor Mike Barhorst voiced surprise at the ruling.

“I received word through the Ohio Municipal League (OML) of Judge David Cain’s ruling nearly as soon as it was issued,” he wrote to the Sidney Daily News in response to questions, Friday. Barhorst serves as vice president of the OML.

“I have to say that I was both surprised and disappointed. The cities and villages involved in the suit were asking that Judge Cain issue an injunction that would prevent the budget provision from going into effect before Feb. 24. That is the deadline by which municipalities would otherwise be required to pass ordinances allowing the state to centrally collect the net profits tax under pain of losing the ability to levy any tax at all,” Barhorst continued.

“Frank Reed, the attorney arguing on behalf of the municipalities, explained the lawsuit’s challenge of state overreach, and how the budget provision not only violates the Ohio Constitution’s grant of Home Rule authority to municipalities, but also violates its single-subject rule,” Barhorst said. “Reed’s argument for the injunction detailed the risk of injury not only to the municipalities in question, but also the negative effects passed down to third parties like businesses and taxpayers.

“I believed that the arguments advanced by the legal team employed by the coalition of cities were compelling. I still believe that they are, and look forward to case’s advancing through the appeals process,” Barhorst concluded.

Staff report