Many local governments are against Gov. John Kasich’s proposal to centralize income tax collection for municipalities and charge a fee to administer the service.

The plan would, according to the Kasich administration, lower costs, reduce staff, provide greater consistency and improve compliance with the tax code.

But local officials say centralizing municipal tax collections would hurt their communities.

Oregon Administrator Mike Beazley said council is considering presenting a resolution in opposition to the plan within the next few weeks.

“The governor’s proposal is presented as an opportunity to increase efficiency and lower the cost of collections. But nobody has seen any evidence of that. There’s considerable concern that the state will end up keeping more local tax dollars in Columbus,” said Beazley. “The state would not have an interest in ensuring that Oregon tax dollars end up coming back to Oregon. So folks are eagerly awaiting details of the proposal, but are concerned that it will end up costing local taxpayers long-term, and it will leave less local money available to meet service needs in our community.”

In addition, the state would charge an administrative fee, possibly up to 2.5 percent, which would be higher than the administrative costs of local governments.

“Oregon charges less than 2.5-percent to run its tax department,” said Beazley. “On top of that, we also have real people who can help the taxpayers who may have a lot of questions. I’ve spoken to leaders from at least 10 different cities in the last two weeks who have all expressed opposition to this proposal. It has only been put forward in the broadest sense.”

Beazley said he was also concerned, as are other local governments, that the state would hold the funds for a period of time.

“It would be very difficult for the state to develop a mechanism to deal with worrying about whether taxpayers are working in Oregon or working in a township that doesn’t have an income tax. It could lead to greater cost of collection, greater delay for Oregon in getting its tax dollars to work here and meet our service needs, and fears that it would lead to lower collection rates,” said Beazley.

“It is certainly reasonable for the governor to raise questions. And there are a variety of local tax returns that lead  to confusion and conflict. All cities have slightly different rules. That is a legitimate question and concern. I think there have to be ways where we can explore with other cities statewide to help make filing more consistent across the board. But it would be very hard to create a ‘one size fits all’ response because every city is different,” said Beazley.

Northwood Administrator Dennis Recker also opposes centralizing municipal income taxes.

“We do a great job of collecting our own taxes here. I don’t think there is any community out there that’s really in favor of state centralized tax collections,” said Recker. “The costs associated with that would be passed on to us. Ultimately, there would be a comparison of what it costs us to do it locally, which is pretty reasonable, and what the state’s fees and charges would be. Plus, what percentage of the revenue is left to come back to be used here in the local community? I do not believe it would be a cost saver. It just undermines the local government’s ability to raise and collect revenues and put together sound budgets.”

Ohio Rep. Matt Szollosi, whose 49th District includes Oregon, also opposes the plan.

“I think it’s a terrible idea. You hear about the importance of local control from this administration, and then the governor’s proposal does exactly the opposite,” said Szollosi, a Democrat. “I actually have faith in our local officials, that they can administer their budgets and take inventory of their revenue in a responsible and efficient manner. I don’t think that our local municipalities need the state to step in and take over that local government function for them. At a time when the Local Government Funds have been slashed by this governor, it seems to me that it’s just another step in the direction of pushing the state’s revenue problems to the local level.”

Szollosi believes Kasich will have difficulty getting the proposal passed in the Legislature because of the near universal opposition from across the state.

“I think the governor is going to have a very, very tough sell on this issue, primarily because it is clearly an invasion in what has historically been a purview of local government. Republicans are in control of both the House and the Senate. I would be surprised if there was a lot of support among Republicans, but they passed a budget slashing the Local Government Fund by 50 percent, so maybe it’s the next step. Kasich has a solid majority in both houses. If he pushes hard enough, he might get the vote,” said Szollosi.

The Ohio Municipal League, which also opposes centralizing municipal tax collections, stated in its August 15 bulletin that the concept has been discussed before but never by an administration official, leading the group to believe that it is a top priority of Kasich.

“The concept of taking away the ability of municipalities to collect and administer their own locally approved municipal income tax through a central collection scheme is not new as the League has been in discussions with parties who would like to see this change occur,” states the OMB. “This does, however, represent the first time in our knowledge that an administration official has unveiled the plan in some detail and in such a public forum. This indicates to us that central collection is at the top of the list for the next round of wholesale changes in store for Ohio municipalities. We believe this radical proposal would be a tremendous financial blow to Ohio’s municipalities, would be impractical in a wide range of areas from enforcement to fair application. “

The OML goes on to call the concept “bad tax policy” that will directly undercut the financial future of communities and circumvent local control.

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