Municipal income taxes are generally imposed on wages, salaries, and other compensation earned by residents and nonresidents who work in the municipality. The income tax is also applied to business net profits that are attributable to activities in the municipality. Most municipalities allow a partial or full credit to residents for municipal income taxes paid to another municipality where they are employed.
Administration of the municipal income tax is strictly local, either by the cities and villages themselves or by central collection agencies under contract with various municipalities.
State law requires that the rate must be uniform within a municipality and cannot exceed one percent without approval by voters. Rates of taxation in 2018 ranged from a low of 0.50 percent (eleven municipalities) to a high of 3.00 percent in the City of Bedford and Parma Heights (Cuyahoga).
The City of Euclid (Cuyahoga) is the only municipality levying and collecting municipal income taxes for its corresponding school district where the tax is levied on both residents and nonresidents of the municipality; the city’s income tax is 2.38% while the Euclid City School District has a 0.47% tax. Statutory authority for this type of municipal income tax was repealed beginning on January 1, 2001 by S.B. 287. An election to levy the tax (dividing revenue between a municipal corporation and a school district) is permitted in accordance with R.C. 718.09, but not on the income of individuals who do not reside in the municipality.
The LG-11 data is drawn from survey responses of Ohio’s municipalities. There were 127 municipalities (or 19.8 percent of the total) that did not submit calendar year 2018 (CY18) data. Using previously reported data for these municipalities and survey responses for the remainder. the total CY18 municipal income tax net collections was $5,599.6 million. This is an increase of approximately $205.2 million or 3.8 percent from CY17.
Approximately $5,133.4 million was collected by cities and $466.2 million by villages. For those localities that had the tax in effect for the full year, net collections ranged from approximately $9,715 in Village of Cecil (Paulding) to approximately $864.6 million in the City of Columbus (Franklin).
Assuming that the 127 municipalities that did not submit CY18 data still had an income tax in effect, a total of 642 municipalities (242 cities and 400 villages) levied the tax. There were 9 municipalities for which a new income tax become effective for CY18.
Data for Table LG-11 were obtained from surveys conducted by the Ohio Department of Taxation.
