The History of the Ohio Municipal Income Tax

In the PowerPoint presentation entitled “Municipal Income Tax: History and Uniformity” and delivered on July 12, 2012, J. Donald Mottley provides an in-depth analysis of the events leading up to current uniformity legislation and, in doing so, dispels some of the prevalent misconceptions regarding municipal income tax.

The following is a short summary of milestone events in municipal income tax history as touched upon in “Municipal Income Tax: History and Uniformity”:

  • 1400s: Municipal income tax originated as a concept in Florence and its surrounding Italian cities.
  • 1913: The oft-mentioned Home Rule amendments were made to the Ohio Constitution.
  • 1932-39: In the United States, Philadelphia was among the first to enact a municipal income tax with the passage of the Sterling Act.
  • 1946: Ohio’s first city to enact a municipal income tax was Toledo.
  • 1947-49: Columbus enacts a municipal income tax. Springfield, Youngstown, Dayton, and Warren follow suit.
  • 1957: The first uniformity statute is enacted (O.R.C. Ch. 718).
  • 1959: Angell v. City of Toledo establishes that, for non-residents, only income earned in a municipality may be taxed there.
  • 1965: Thompson v. City of Cincinnati establishes that, for residents, one’s home jurisdiction may tax any income regardless of type or location earned, unless prohibited by statute.
  • 1967: The first serious attempt at uniformity, a “legislator’s tax” dealing with the taxation of legislators’ and the Lt. Governor’s pay, was introduced.
  • 1966: Cleveland enacts its own municipal income tax, leading to the creation of the Central Collection Agency (CCA).
  • 1971: The Regional Income Tax Agency (RITA) is formed.
  • 1996-98: Further attempts made towards tax uniformity, such as exemption of those in the National Guard and the allowance of stock option exemption. In 1998, a uniformity bill, HB 803, was proposed but did not make it past its first hearing.
  • 2000: HB 477 and HB 483 are introduced. Further items of uniformity, such as the 12-day rule and credit for pass-through entity income taxed elsewhere, are included.
  • 2003: The Zaino Commission Report is released, leading to HB 95 and the creation of the Ohio Business Gateway.
  • 2010-11: State-sponsored centralized tax collection is introduced as a possibility to the Kasich administration. Commissioner Joe Testa reviews the possibilities and financial feasibility of State centralization.
  • 2012: Legislative efforts are now focused on uniformity. Though considered “off the table”, the Department of Taxation believes State centralization to be a financially viable option.

Click here to view “Municipal Income Tax: History and Uniformity” by J. Donald Mottley in its entirety.