There are almost 600 municipalities in Ohio levying local taxes, using about 300 different tax forms with varying deadlines, penalties and codes.
That poses needless headaches for taxpayers and employers as well as the municipalities themselves.
House Bill 5, which was approved this past month, aims at simplifying the state's municipal tax filing system, not by creating a centralized collection system but by establishing uniform rules on due dates, filing extensions, penalties and code definitions. That promises to be an improvement over the existing system in which each municipality sets its own tax-filing rules and requirements.
"Ohio has the most complicated and illogical local income tax system in the country," said Rep. Cheryl Grossman of Grove City, the primary sponsor of House Bill 5, which cleared the House by a vote of 56-39 and now heads to the Ohio Senate. "The basis for good tax policy should include simplicity and flexibility. Neither is currently found in Ohio's municipal income tax code."
For Ohioans who live and work in the same municipality, filing a local income tax is relatively simple. But for those who live in one municipality and work in another, that may not be the case. Households with wage earners working in different cities may find themselves filing three or four local income taxes, depending on reciprocity rules, with varying tax deadlines, penalties and other requirements.
Simplifying tax regulations with an eye toward making them more uniform is a taxpayer-friendly move as well as a business-friendly one. Small businesses in particular now face considerable challenges juggling tax requirements for multiple municipalities.
Opponents of House Bill 5, including the Ohio Municipal League, warn about a loss of local control and potential reductions in local tax collections. We question that.
Making it easier to file a tax return is a common sense solution. We hope the Senate agrees.