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Ohio Group Slams Proposed Repeal of COVID Commuter Tax Provision

Posted on Sep. 23, 2020

Repealing language from an Ohio coronavirus relief measure that allows employers' localities to collect taxes from individuals working remotely would result in an economic loss for the state’s cities, according to the Greater Ohio Policy Center.

The center's September 9 report urges against H.B. 754/S.B. 352, recently filed legislation that would repeal section 29 of H.B. 197, which was enacted March and requires work performed at home to be treated as if it had been performed at one's workplace for municipal income tax purposes.

Section 29 allows cities to continue collecting taxes from employees working outside their principal places of work because of the COVID-19 pandemic.

“These efforts threaten the ability of Ohio’s largest economic centers to pay debt service on past strategic investments, envision future ones, and maintain critical services, thereby hampering their ability to drive economic growth, retain existing employers, and attract new ones,” according to the report.

The report also argues that the lawsuit filed July 2 by the Buckeye Institute against the city of Columbus and the state challenging section 29 would “jeopardize Ohio’s economic competitiveness.” The suit alleges that section 29 violates due process requirements of both the U.S. and Ohio constitutions by preventing workers from entering their principal places of work in Columbus but taxing them as if they had.

The report notes that individual income tax revenue makes up a large part of own-source city tax revenue in the state. If section 29 is repealed, the state's six largest cities by population could collect approximately $131 million in income tax revenue from residents who are employed outside the cities and are now teleworking from home, but those cities stand to lose $437 million in revenue from workers who are employed in the cities but reside elsewhere. That would result in a net decrease of $306 million in revenue to the six cities, the report states.

Ohio cities use their income tax revenue to pay for health, safety, and economic development services. Most of them also dedicate a portion of their income tax collections to capital and infrastructure debt, according to the report.

"The infrastructure employers relied on to get employees to their workplaces still has pre-pandemic bond debt that needs to be retired, even if work-from-home commuters haven’t used roads or bridges within our Big 6 Cities in the last five months," the report says.

“Ohio’s income tax structure should not be changed. Using a temporary pandemic to justify changes to a long-term tax structure would unfairly penalize cities [that] have long supported Ohio’s economic competitiveness and made investment decisions based on the expectation of this structure’s existence,” according to the report.

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