CLEVELAND, Ohio – The Ohio Senate Finance Committee has inserted language into a proposed budget bill that would allow workers to seek refunds for income taxes paid to cities where they did not live or perform their jobs during 2020 and 2021.
The bill’s language differs from House Bill 157, passed by the House last month, that would allow for refunds for 2021 but would essentially leave it up to the courts as to whether taxpayers could request refunds for 2020.
Jay Carson, an attorney with the conservative Buckeye Institute, said if the language in the proposed Senate bill becomes law it would probably eliminate the need for lawsuits filed by his organization.
The question over payment of municipal income taxes arose after Gov. Mike DeWine issued a stay-at-home order in March of last year that prompted many workers to start doing their jobs remotely during the coronavirus pandemic.
Shortly thereafter, the state legislature passed an emergency law allowing for businesses to continue to withhold income taxes from their paychecks as if they were still coming into the office. Both House Bill 157 and the Senate Finance Committee budget draft extend the emergency withholding through 2021, but do not assess actual tax liability.
The Buckeye Institute is among those claiming that it is unconstitutional for cities to collect income tax from those who don’t live or work there, even under the emergency circumstances dictated by the legislature.
“The Ohio Senate leadership deserves a round of applause for recognizing the constitutional problem inherent in Ohio’s emergency-based local income tax system that unconstitutionally allows cities to tax people who neither live nor work there,” Buckeye Institute President and CEO Robert Alt stated in a news release Tuesday. “The Senate’s changes would protect Ohio taxpayers as The Buckeye Institute has called for in its cases challenging the state’s pandemic-based tax system.”
A number of cities objected to House Bill 157 before it passed 63-31.
Rep. Beth Liston, a Democrat from Dublin, said during debate prior to the vote that many cities have set budgets based on expected revenue and now are going to have to make damaging cuts as a result.
Cities across the state stand to suffer steep declines in income tax revenue as changing work habits are likely to become permanent. The problem could be profound for work centers such as Cleveland, Solon, Beachwood and Mayfield, prompting major budgeting changes.
Cleveland levies a 2.5% income tax on workers, and 85 percent of the money collected comes from workers who live beyond the city limits.
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June 02, 2021 at 10:26PM
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