Council asked to go on record against income tax change

Finance Committee members agreed to forward a resolution for city council’s consideration to oppose H.B. 5, the still pending municipal income tax uniformity legislation supported by many Ohio businesses.

Committee Chair Councilman K. Bret Apple said he had no problem letting the General Assembly know their opinion on the bill, which if approved, “would be potentially detrimental to the city.”

City Auditor Betty Brothers said they don’t know for sure how much the city could lose, but stressed that the city would lose income from the provision dealing with net operating loss carry forward, which would allow a business to carry a loss over more than one year. The city does not currently allow that. The provision is calling for a net operating loss carry forward of five years, which would reduce the amount of tax paid to the city.

City Income Tax Administrator Fred Pamer didn’t attend the committee meeting, but dropped off a sample resolution for the committee to review and consider. At a previous meeting, he estimated the loss from the net operating carry forward provision could cost the city $250,000 to $300,000 per year in income tax receipts.

He also said the law would take away local control of the income tax and give it to the state. The city relies on the 1 percent income tax to pay for many city operations funded through the general fund, including the police and fire departments, street department and administration.

Brothers said a lobbyist came to a recent Salem Area Chamber of Commerce function and wanted everybody to support H.B. 5, touting what it will do for businesses in Ohio by creating more uniformity. She said it’s not going to be good for the city.

Councilwoman Cyndi Baronzzi Dickey, who was in attendance at the committee meeting, but isn’t a member of the committee, said she understood they were trying to assist businesses and attract more business to the state. On the other side, though, she said she doesn’t want the city to lose money because of the wording of the legislation.

“This bill is not good for cities,” she said.

Councilman Dave Nestic, who’s on the committee, said he wanted to look more into the pros and cons, but agreed to support getting the question to council for discussion. Councilman Brian Whitehill, who’s also on the committee, moved for the resolution to be forwarded to council.

The bill has been favored by businesses to make dealing with taxes less cumbersome, but opposed by municipalities which rely on income tax receipts and fear the changes will cost them.

The Ohio Chamber of Commerce supports the bill and asked chambers across the state to endorse support of the bill, but Salem Area Chamber of Commerce Executive Director Audrey Null said “we’re staying neutral on the issue.”

The Salem chamber’s legislative affairs committee gave information to the executive board on H.B. 5 and the board chose to stay neutral, taking no position in favor or against the municipal income tax reform. Keith Lake, vice president of governmental affairs for the Ohio Chamber of Commerce, was the self-described lobbyist who recently spoke to chamber members about H.B. 5.

Null said the legislative affairs committee meets on a number of issues, whether state or local, and provides information so the board can decide whether to endorse an issue or decide to stay neutral. In the past, the chamber endorsed a Salem school district issue on the ballot, but stayed neutral on the city’s 1/2 percent income tax issue several years ago.

The chamber became heavily involved in supporting countywide 911 several years ago, even forming a political action committee.

At a Finance Committee meeting in June, state Rep. Nick Barborak, D-Lisbon, spoke about H.B. 5, saying he had met with both proponents and opponents of the legislation. He said he wanted to keep an open mind and listen to both sides and had not decided where he stood.

The Municipal Tax Reform Coalition website at said “the Coalition is seeking legislative change that would establish a more uniform municipal tax code that all municipalities assessing a tax on businesses or individuals would follow, including a uniform definition of income, withholding, penalties and interest, and all related rules and regulations other than tax rate and reciprocity rate.”

The Ohio Municipal League website at said the Ohio Municipal League opposes the legislation for several reasons, including the five-year net operating loss carry forward provision.

In another financial matter, Brothers advised she learned the city’s anticipated revenue from the state Local Government Fund for 2014 will be $88,305, which is nearly $30,000 less than the $117,000 received this year. Between 2011 and 2013, she estimated the city lost 55 percent of its LGF income due to state cuts.

She also said even though the estate tax is no longer in effect, they’re still receiving income from estates from 2012 and so far they’ve received $95,000 this year.