House bill would upset tax stream | News, Sports, Jobs

The Ohio House approved a bill that could cause significant financial difficulties for cities and villages that levy income taxes on people who no longer work in those communities as a result of the COVID-19 pandemic and don’t live there.

The bill is retroactive to Jan. 1 of this year, meaning those who worked from home in communities without income taxes could seek refunds from the city where they used to work for all of 2021 and then into the future if they don’t return to their places of work.

The House passed the bill 63 to 31 on Wednesday with all Republicans supporting it and all but one Democrat (Rep. Daniel P. Troy of Willowick) opposing it. It now goes to the state Senate.

In March 2020, after Gov. Mike DeWine ordered nonessential employees to work remotely from home because of the pandemic, the state Legislature approved a bill that permitted businesses to still take out municipal income taxes from those workers’ paychecks.

The bill approved Wednesday would allow that to continue on a voluntary basis through the end of this year but also permits those impacted employees to seek refunds for 2021 in early 2022. Also, those who don’t return to their workplace would no longer pay the municipal income tax at all starting in 2022.

Youngstown Finance Director Kyle Miasek said this will severely hurt the city.

“It’s quite a huge chunk of raw income tax lost,” he said. “It would be very detrimental to the city.”

About 85 percent of the money collected by the city’s 2.75 percent income tax comes from those who work in Youngstown but don’t live there, Miasek said.

The city is projecting to get $43,601,000 in income tax this year, a decline from $44,404,600 last year and $47,133,500 in 2019.

Depending on how many people continue to work from home and don’t return to their workplace in the city, Youngstown could lose between $3.3 million to $6.6 million a year if this law is passed, Miasek said.

The impact, he said, wouldn’t be immediate because the city can offset those loses for this year, 2022 and 2023 through a portion of the $82,775,370 it is getting from the federal American Rescue Plan in COVID-19 relief money.

The ARP allows cities to use money to make up income tax lost because of the COVID-19 pandemic. The city already has prioritized replenishing the money lost last year compared to 2019 and will do the same for this year, 2022 and 2023, Miasek said.

“It wouldn’t cause problems for us immediately because ARP allows us to replace lost income tax,” he said. “But it would reduce the money we’d have to impact the community in other ways. Also, going forward, if our baseline is going to be reduced because of people working from home, it would mean Youngstown would lose money after calendar year 2023.”

He added: “It’s great we’d have the ability to recover, but we’d have less money to spend on other target areas because we’d have to make up the shortfall.”

Warren City Treasurer Thomas Letson said he has not seen the final version of the bill that passed the Ohio House, but, at this point, he does not believe it will have a significant impact.

House Republicans said the time has come to end taxing people who no longer work in cities and villages with income taxes.

State Rep. Kris Jordan, R-Ostrander, the main sponsor of the bill, said: “This is simply not fair to the taxpayers we represent.”

State Rep. Jay Edwards, R-Nelsonville, the other main sponsor of the bill, said: “It’s pretty common sense that they wouldn’t be able to take out your tax dollars or withhold taxes from your paycheck if you’re not working in those cities.”

At one point, state Majority Leader Bill Seitz, R-Cincinnati, compared the municipal tax to the lyrics of the Beatles’ song “Taxman,” and recited a large section of the lyrics.

He added: “Cry me a river, cities,” saying they’re getting millions in ARP funding.

State Rep. Lisa Sobecki, D-Toledo, the ranking Democrat on the Ways and Means Committee that approved the bill last week, said: “After a decade of budget cuts to local communities, Republicans are looking to pull the rug out from under communities again with this bill that will decimate local government resources.”

Democrats sought amendments that were rejected by Republicans to extend the current temporary tax rules through 2022 and require the state director of public safety to study and report on reductions in law enforcement personnel and other public safety services because of revenue lost from this bill.

The bill “undercuts local communities and threatens critical funding for public safety and emergency services, roads and other services essential to our everyday lives,” said state Rep. Dontavius Jarrells, D-Columbus.

Kerry McCarthy, executive director of the Ohio Mayors Alliance, said the bill “presents a serious challenge for many local communities and threatens to slow Ohio’s recovery from this pandemic. While we agree that sunsetting this temporary remote working provision at the end of this year makes sense, we do not support other retroactive changes that move the goalposts on Ohio’s cities while the pandemic is still affecting where people work.”