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1 Scott Drenkard, Ohio's Local Income Taxes: Complex and in Need of Reform 1 (2013)

handle is hein.taxfoundation/taxfaaxe0001 and id is 1 raw text is: Ohio's Local Income Taxes: Complex and in Need of Reform Scott Drenkard Economist, Tax Foundation Hearing of the Ways and Means Committee of the Ohio House of Representatives May 7, 2013 Chairman Beck, Ranking Member Letson, Members of the Committee: My name is Scott Drenkard, and I'm an economist at the Tax Foundation. For those unfamiliar with the Tax Foundation, we are a non-partisan, non-profit organization that has monitored fiscal policy at all levels of government since 1937. We have produced the Facts & Figures handbook since 1941, we calculate Tax Freedom Day each year, and have a wealth of data, rankings, and other information at our website, www.TaxFoundation.org. We are guided by the principles of sound tax policy: simplicity, neutrality, transparency and stability. I'm pleased to have the opportunity to speak today with regard to H.B. 5, a bill to reform elements of Ohio's municipal tax system. While we take no position on the bill, I hope to give some perspective based on our research. In 2011, we wrote a paper on city- and county-level income taxes, and found that of the 17 states that rely on local income taxes, Ohio has among the highest rates. In 2010, local income tax collections as a percentage of state personal income were 1.06 percent. The only state with higher effective rates is Maryland. However, sound tax policy is not just about how much money is collected. It is about collecting revenue for necessary government services in the most efficient way possible. Ohio's municipal tax system is far from that ideal. H.B. 5 does a great deal to remove some of the complexity built into Ohio's municipal tax system. I'm hoping it represents a start to a movement by lawmakers to make the code more sensible and user-friendly. Simplifying Income Tax Filing Today, I'd like to do something I normally don't get the chance to do, and that is say something nice about Maryland's tax system. Maryland is similar to Ohio in that the state leans heavily on local income taxes to fund government, but it does so in a way that generally minimizes taxpayer headache. If you look at their state income tax form, the entirety of the 1

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