Struthers tax commissioner prepares for tax reform fallout
By Graig Graziosi
Tax Commissioner James Bertrando is preparing for a rough 2020.
Recent changes to the state and federal tax codes have Bertrando concerned that, barring preparatory measures, the city may have to cut funding to some services next year.
Struthers is one of 160 cities signed onto a lawsuit in the 10th District Court of Appeals – City of Athens v. Joseph A. Testa – suing the state tax commissioner over House Bill 49, which took effect in June 2017.
The lawsuit claims amendments to the Ohio Revised Code found within HB 49 violate the Municipal Home Rule Amendment in the Ohio Constitution.
Specifically, the cities contend the changes interfere with the municipalities’ authority to “administer, collect, audit and receive net profit taxes,” which limits their local sovereignty.
HB 49 restructures tax collection so that businesses can opt in to pay their net-profit income taxes directly to the state, rather than the individual municipalities in which they operate. The state then makes monthly tax-collection disbursements, keeping a 0.5 percent administration fee.
Bertrando says the administrative fees alone may cost the city upward of $30,000 this year.
“So we’re going to see fewer dollars going into the city’s general fund,” Bertrando said. “That can result in more levies and a potential reduction in city services.”
On Jan. 29, the 10th District court ruled 2-1 to uphold HB 49. The lawsuit is expected to be appealed to the state Supreme Court.
In addition to state tax reforms, Bertrando said the 2017 federal tax cuts also hurt the city’s coffers.
“The federal tax reforms raised the adjusted gross income that we can tax,” Bertrando said. “So that’ll be another hit to the general fund.”
Bertrando anticipates the city will begin to feel the pressure of the tax changes later this year and the start of the next.
“I think after tax year 2019 is filed, around April 2020, we’ll see the full effects of the reforms,” Bertrando said.
To prepare for the restricted finances he expects to face, Bertrando’s office has launched a citywide debt-reduction program for businesses and individuals with outstanding bills with the city.
“The goal right now is for us to focus on getting our taxpayers’ debt reduced and increase our revenue so we can maintain city services,” Bertrando said. “It’s more than you can say for a lot of cities that are getting and will get hammered. We’ve been solvent.”
Business or individuals who owe the city money can reach out to the tax commissioner’s department to see how they can best pay down the debt.
This isn’t the first time Bertrando’s department has launched financial correction programs for residents and businesses in the city.
Between 2008 and 2010, Bertrando’s department established tax abatements to help businesses and individuals reeling from the economic collapse.