The missing piece in muni income tax discussion: Citizens

November 26, 2012

By Brendan Fitzgerald, CPA
2012-2013 Chair of the Executive Board

The Ohio Society of CPAs’ latest and profoundly important advocacy role has been focused on reforming Ohio’s complicated, burdensome municipal income tax structure through definitional uniformity. The OSCPA and its 19 statewide and local coalition partners have been working with state legislators for over a year to craft legislation that will simplify an onerous system that affects businesses and individuals alike.

Our effort does not include any attempt to affect the tax rates that a municipality may enact, nor the reciprocity credit or form of collection. Everything else is on the table for uniformity.

On the other side of the debate, the Ohio Municipal League (OML), representing the nearly 600 taxing communities in the State, is trying to exert its influence by shifting the focus of their opposition to income tax uniformity to the potential revenue impact they say such reforms would have on their member communities. We both are fighting for what we think is right for our respective constituents.

The one significant absence during the recent information-gathering meetings held throughout Ohio has been the voice of the people – the residents of the affected communities. What do they want?

The purpose of city government is to provide the essential services that residents demand but cannot provide for themselves, such as emergency services, public parks, utilities and waste disposal, libraries and road maintenance. These are hardly speculative ventures for cities to engage in, and the quality of such services represents a community’s – including individual and business taxpayers – “return on investment” for the taxes they pay.

Taxpayers also have strong opinions on how to best balance maintaining services people demand, keeping costs down and being treated in a fair manner.

Very early in my public accounting career, I was assigned to work with a business owner who was a sweet and gentle man until he talked about government. During one of those non-gentle times he said something that is worth repeating some twenty five years later. He said, “Before the government can give you anything, they first have to take something away from you.” I have used that quote many times over the years. From a municipality’s point of view, I could alter that quote to be, “before we can provide you with the services you demand, you must first give us the resources to provide them.” But if residents don’t speak up, their municipality will likely conclude that all are in agreement with their actions. That holds true with income tax treatment ordinances their city adopts.

So while we focus on simplification and uniformity to make Ohio more attractive to employers and easier for residents to comply, the OML’s opposition to true reform should not be based on the city’s perspective only. At the end of the day, government is accountable to all of us: individual and business taxpayers have also borne the brunt of recent economic difficulties. Many of us are simply unable to spare additional dollars without sacrificing necessities or simply closing our doors.

At some point cities will be unable to find any more room to punch another hole in an ever-tightening belt. We have every right to know how our tax dollars are spent, but we also need to recognize we should expect to pay for what we demand and can afford – and be remembered by cities as the source that makes all those services possible. Most people understand that some amount of tax is necessary for the collective good of a community. Whether the future is a regionalized shared-services approach or a menu-based choice of city services, the residents must decide what they want. Residents who don’t take the time to share their thoughts – through direct contact with city leaders or in the voting booth – can’t be surprised when decisions go another direction. That reality holds true in our current municipal income tax uniformity debate.

While the OSCPA and OML can find common ground on many of the specific reforms we support, there are still some hard decisions and compromise required to get meaningful municipal income tax reforms. OSCPA and its coalition partners have worked collaboratively with the OML and interested cities in an attempt to achieve consensus on definitional uniformity provisions, but there are several key issues where we had to agree to disagree. Ultimately, Ohio legislators will be the final decision makers – and they will depend on their voters and local elected officials to inform them of their views. You can be assured that many city officials are speaking out against municipal income tax uniformity. Are you countering that with your own experiences to help enact change?

Those who are impacted the most – the individual and business taxpayers – need to have their voices heard. We encourage you to do just that.

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