Currently, remote workers pay taxes to the city where their office is located. A new proposal would change this to the city in which they live.
COLUMBUS, Ohio – If you live in Perrysburg but work in Toledo, the city of Toledo collects an income tax because you have to drive the city streets and are protected by Toledo police and firefighters.
But like so many other things, COVID-19 has changed that.
All of a sudden, thousands of employees were working from home, still paying those income taxes, but never getting what they paid for because they never actually went to work.
“We’re seeing a transition from people’s jobs. Obviously we’re seeing a lot of people working from home, and that’s a new phenomenon,” says Rep. Derek Merrin, R-Monclova.
Prior to the pandemic, workers who had not gone to the office for at least 20 days could apply for a community tax refund from the city where their office was located.
However, at the start of the pandemic, lawmakers passed a provision that ended this practice and only allowed tax dollars to go to the city where their company’s office is located, even if they were working from home in a different city.
Merrin says it was a spiritual business favor.
“So you didn’t have to swap someone’s withholding tax and say, ‘Well, you work in Toledo but now you stay at home in Sylvania’ and you had to change your withholding tax from Toledo to Sylvania for two or three weeks and then have to switch back right away, “he explains.
The determination expired 30 days after the emergency ended. At the moment, that date is August 23rd.
Merrin says the determination shouldn’t take that long, so he co-sponsored House Bill 157, which would move remote workers’ taxes in 2021 to the city they live in rather than where their company has an office . It wouldn’t apply to 2020.
“So we really have some of the big cities that people really take advantage of and say, ‘We’re going to tax you even though you don’t work here and you don’t live here and you can’t constitutionally do that,” Merrin says.
In fact, some distant workers are suing the cities of Toledo and Oregon. Jay Carson of the Buckeye Institute is representing plaintiffs in the lawsuits he says are in the early stages.
While Toledo says he will not comment on any pending litigation, Communications Director Ignazio Messina said in part in a statement on House Bill 157: “This proposed change in law would generally benefit dormitory communities and punish larger communities like Toledo.”
Keary McCarthy of the Ohio Mayors Alliance says the provision was passed at the start of the pandemic to bring stability to cities like Toledo. He says if HB 157 is passed and remote workers are allowed to claim refunds for 2021, it would jeopardize the fiscal health of cities across the state and set back economic recovery.
Says Messina, “Toledo, recently ranked America’s number one midsize city for new business development, and other major cities in Ohio have historically adjusted to state-level changes that had a negative impact on operating budgets. The pandemic Die The way employers work has changed, and neither of us really know how those changes will play out in the long term, but we will continue to monitor this for months and even years to come. ”
“I’ll be watching with interest,” says Craig Stough, Sylvania Mayor. Suburbs like his stand benefit from the bill.
Stough says he’s seen quite a few tax returns in lawmakers over the years. He says these recent efforts are detrimental, if not devastating, to his community.
“We have a lot of people from the Sylvania community working in the city limits and paying taxes to the Sylvania city so we would lose that. So there are pros and cons, but I’m pretty sure it’s still a network would be profit for the city of Sylvania, “he says.
While he can anticipate when HB 157 is over, Stough doesn’t think it’s the fairest way to distribute income taxes. He wants to revert to a tax reciprocity policy that Toledo dumped decades ago. He says Sylvania lost about $ 2 million in the process.
“Where people work, that’s where they collect taxes, but you send half of it back to where people live. I think that makes sense,” says Stough.
Merrin says if his bill works, it will work out if people file their taxes.
“When a person files their tax return, they’ll say I worked ‘x’ days in the city of Waterville and ‘x’ days in the city of Toledo. And then you file your tax returns and maybe you deserve a refund from the city Toledo, “he explains.
He expects the bill to pass on May 26 and action in the Senate before the break in late June.
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