Bill That Would Reduce Local Revenue Is On Fast Track In Ohio Senate

Moves are underway in the Ohio Senate to ensure quick passage of legislation that will reduce revenue for cities already struggling to cope with four years of state budget cuts. Yesterday, Senator Bob Peterson was named Chair of the Senate Ways and Means committee, an unusual move when his predecessor has two months left of his term. But Peterson is the lead advocate in the Senate for the passage of House Bill 5, so the move — combined with last week’s re-assignment of the bill to Peterson’s committee — is a sure sign it’s on a fast track to passage during the current lame duck session.

HB5 would make filing more consistent across over 600 cities and villages in Ohio that levy an income tax. But the bill goes beyond a uniform process and imposes mandates on what types of income cities can tax and which deductions they must allow. For many cities, this aspect of HB5 will result in substantially lower revenue to pay for local services.

HB5 comes in the wake of four years of budget cuts and a global recession that has left many Ohio cities with no choice other than to increase income taxes or cut services — often both. Many, including including Dayton, Lima and Mansfield, have not yet seen local revenue return to pre-recession levels. Over 100 Ohio municipalities have increased income taxes since 2011. Starting with the passage of the first Kasich budget in 2011, revenue shared with local communities through the state’s Local Government Fund has been cut in half. That budget also eliminated the estate tax, 80% of the proceeds of which go to local communities.

Combined with the impact of State cuts, Ohio cities and villages are in no condition to absorb yet another hit from the passage of HB5. Last Tuesday, voters in Ohio opted to increase local income taxes in 18 communities. Another 17 communities saw tax increases fail at the ballot.

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In Chillicothe, rejection of the City’s proposed $280,000 increase in income tax led to the immediate announcement that fire and police personnel would be laid off, and that two of the City’s fire stations would close. If House Bill 5 passes, Chillicothe officials estimate they would lose an additional $100,000 each year, making the budget situation even more dire.

The headline in Chillicothe the day after voters rejected city tax hike.
The headline in Chillicothe the day after voters rejected city tax hike.

House Bill 5 receives its first hearing in the Senate Ways and Means committee tomorrow morning.