MANSFIELD, Ohio — Mansfield City Council will have to decide before the end of the year whether workers under the age of 18 will have to begin paying municipal income taxes in 2016.
Currently, those younger than 18 who either own their own business or work for an employer aren’t taxed on any of their earnings.
This option of taxing minors arose as a result of the Ohio General Assembly’s passage of House Bill 5.
Chris Brown, deputy law director, explained during Monday’s finance committee meeting, “In the past year, the Ohio General Assembly passed House Bill 5, which basically takes away a lot of our home rule power to control our own municipal income taxes. Previously, Ohio Revised Code Chapter 718 granted us pretty wide authority to regulate our own affairs as part of our home rule authority.
“After House Bill 5, the idea of the General Assembly was to uniform municipal income taxes across the state, and along with that there are certain greater exemptions that we must now allow different corporations or persons to make that previously our code did not.
“To put it very simply, we have to adopt an ordinance that is in line with what is required by the new Chapter 718 and under that guideline, we have much less wiggle room to do as we please. Basically, they want businesses who come to Ohio to know what to expect if they open a business, no matter which city they open it in.”
He said the Ohio Municipal League has come up with a draft ordinance that outlines the steps that each municipality must take to be in line with the new state code.
“There are a few places where we still have some choice in what we do–part of that is how much we tax. As you know, the state code allows us one percent without going to the voters. After that we must go to the voters. So our total tax rate now is two percent, between the pride tax, the pothole tax and the safety tax,” he said.
He discussed before members of council what options are included in the 60-page draft ordinance–that way they’re informed before it comes time to vote on the legislation.
As mentioned previously, one of the options is taxing minors fully, in part or not at all.
In a poll of 170 municipalities, 80 of them reported that they taxed minors, while 90 said they didn’t, Brown said.
Finance Director Linn Steward said she researched other cities and discovered that some cities taxed workers 16 and older and others taxed everyone.
She said she doesn’t have a stance on the issue but that she wanted to make council aware of this option “because once we bring forward the new ordinance, I don’t think that can ever be changed. I think some of these other sections could be changed but not this taxing under the age of 18.”
Other options council will have to consider pertain to senior citizens and Mental Retardation and Developmental Disabilities (MRDD).
Under Mansfield’s current tax ordinance, mentally handicapped workers earning less than minimum wage are exempt. Council will have to decide whether to continue that and, if so, whether to require them to file a return.
Council will also have to decide if the first $2,500 earned by people 65 and over who are earning W-2 income will remain tax free.
“Normally, if you’re working inside Mansfield, the employer’s going to withhold it, so that’s going to generate a refund,” explained Income Tax Director Rick Gulley.
He researched the total refund amounts for the past few years, noting, “For calendar year 2013, that credit was $13,805 worth of refunds. In 2014 it was $15,610. So far this year it’s $20,463–that’s what the credit costs the city for having that in the ordinance.”
Another option to be considered, he continued, “Is if your only source of income, if you’re over 65, is rental income, the first $6,350 that’s earned as far as rent income is tax exempt.”
When discussing these options, Brown commented, “It’s the law directors office’s opinion that we should carry [the current practices] forward, mainly because that’s the way we’ve been doing it…For the most part, we are going to see a noticeable decrease in the amount of taxes that we get because of the deductions and the carry-forwards and offsets, etc. that we don’t have control over…
“And so where we can maintain what we’ve done before it would probably be best to maintain that rather than kind of add insult to injury and take away more than what don’t already have control over.”
He reminded council that they ultimately have the final say when it comes to these options.
Council also has the authority to decide the penalty for those who fail to file or pay their income taxes.
“Currently, if you fail to file, or fail to pay, it is a third degree misdemeanor. A third degree misdemeanor, I believe, carries a maximum fine of $500 and a maximum jail time of 60 days in jail,” Brown said.
He said they can also increase the level of misdemeanor for subsequent offenses within one year after the first offense.
“From the law director’s perspective, I would say keep it the same. Make the first time someone fails to do this a misdemeanor of the third degree and each subsequent offense a second–your standard one, two punch that we currently have,” he said.
Brown said that the draft is still a work in progress and that it will not overwrite the current ordinance for 2015. He noted, “That [the current ordinance] will still be in effect for 2015, but it will become null Jan. 1, 2016, and this new one will then be in effect.”
The finance committee is likely to have another meeting before the ordinance will be presented during Mansfield city caucus in October, Steward said. She said hopefully the ordinance will be passed in November before it must be enacted by Jan. 1 of 2016.
She said that they hope to post information about any changes on the city website so taxpayers and employers are aware.
“We will be putting some information up probably in October because some of the due dates have changed that we have no authority to make different,” she said.
“There are a few places where we still have some choice in what we do–part of that is how much we tax. As you know, the state code allows us one percent without going to the voters. After that we must go to the voters,” saiad Chris Brown, Mansfield’s deputy law director.
