Salem officials want city to sue state on tax

SALEM– The city’s treasurer and income tax administrator are asking council to consider joining a class action lawsuit that will prevent the state taxation department from collecting part of the city’s income tax.

Treasurer John Conrad and Income Tax Administrator Fred Pamer this week provided council information regarding the lawsuit that seeks an injunction against the Ohio Department of Taxation permitting businesses to file their city income tax through its department instead of directly with the city. The state will then keep .5 percent of the tax collected.

Pamer said a house bill regarding income tax collection passed in 2014 and cities must adopt a resolution allowing businesses to file through the state by Jan. 1 or forfeit the ability to collect the tax itself.

If all businesses in the city were to file through the state, the city could experience a possible loss of $7,500 annually, Pamer said. And although the the initial .5 percent fee does not seem extreme, there is speculation it could increase at a later date, he added, noting that the precedent has been set with other state programs.

Law Director Brooke Zellers shared an additional concern–the erosion of the state constitution.

“This is not an issue of being business friendly,” he said. “Municipalities have the right to govern themselves (under the state constitution).”

Councilwoman Cyndi Dickey, however, disagreed, noting that Pamer had brought the issue before council last year and council declined to join the lawsuit at that time. She said she feels it is an issued of being business friendly since businesses will be able to make one income tax payment to the state taxation department, which then disperses it to the cities in which it pays income taxes.

“Hopefully it generates new businesses and encourages them to locate (in Ohio),” she said.

Council must decide on participation in the lawsuit by the end of October, Pamer said. There will be a $4,000 fee to join the action.

The issue must go before the committee-of-the-whole which would then make a recommendation to council. A committee meeting was not scheduled to discuss the issue and no one asked for one at the council meeting.