Marion City Council approved two tax issues at their meeting on Monday, June 23. The first issue will require income tax to be paid on winnings from casinos, lottery, bingo, and other games of chance. The second issue is a proposal to raise the City of Marion income tax by 0.25 percent. That increase request will now appear on the November ballot for voters to approve or deny.
An oversight by President of Council Dave Edwards caused confusion prior to the vote on the taxing of gambling winnings. After receiving a first and second on the motion to approve the issue, Edwards asked if anyone wished to speak, but did not see two hands go up in the audience. He realized his mistake, but not before “calling the question” which, according to Council rules, means a vote must take place immediately. This oversight prevented the two in the audience from speaking on the issue prior to it being voted on by Council.
The issue was passed by Council with Jason Schaber and Ayers Ratliff voting against the measure. Following the vote, Ratliff expressed his frustration, saying he thought it was “dumb” that council rules could prevent people from speaking on a subject simply because someone made an innocent mistake.
Councilman Mike Thomas said he understands Ratliff’s frustration, but pointed out that Monday’s meeting was the third reading and provided ample time for public input and questions.
A few minutes later into the meeting, while discussing the income tax increase proposal, Ratliff said he voted against the ordinance to tax gambling winnings because of the inability to deduct losses.
The federal government allows people to deduct their losses against their winnings. City Law Director Mark Russell had explained that the City must follow State of Ohio law when it comes to taxation and therefore people would not be able to make that deduction. For example, if a person lost $1,000 and then won $10, they would be taxed on the $10 without being able to deduct the $1,000 loss.
Ratliff said he just doesn’t feel that the City should not be in the residents’ pockets just because they got lucky at a casino.
The new tax rule is expected to take effect within the next two months.
Income Tax Increase
Very little discussion took place for the third reading of a proposal to ask voters for an increase in the City of Marion income tax rate. In fact, the previous meetings on the 0.25 percent increase request have all seen little opposition to the plan.
Marion resident Charlie Blevins told Council that he is still “teetering on this issue” because he is concerned that in the past the council and administration had “been a little careless with their money.” Blevins said that even so, the City is struggling and he said it needs police and fire personnel back. He commended the City for the cuts they have made, but said he feels the trust of the citizens just is not there. Blevins said residents are going to be concerned that City employees will get raises if they approve the tax increase and said residents want to see the City budget remain very tight.
Ratliff said that he’s always prided himself in voting the consensus of the residents of his ward, saying he has heard from people for and against the tax increase. He explained that if Council alone could approve the increase, he would not be in favor of it because he feels the citizens should be allowed to vote on the issue.
Ratliff stressed that his vote to allow the ballot measure should not be construed as an endorsement for the increase, but rather an endorsement of the opportunity for residents to decide on the level of service they desire.
Council then approved the income tax increase request with only Schaber voting against. He did not explain his vote during the meeting.
The issue, asking for a 0.25 percent income tax increase, will now appear on the November ballot for voters to issue the final decision. If approved, the increase would take effect January 1, 2013.
As part of the proposal, Council has earmarked the increase to go to specific departments. If approved, the police and fire departments would each receive 40 percent of the revenue increase and the Streets Department and Dispatch Center would each receive 10 percent.
Issues Raised Concerning Tax Changes
Near the end of the Council meeting, during the time reserved for public comments, Larry Moody, the former tax commissioner for the City of Marion, spoke and outlined several loophole he said he found in tax changes passed by City Council. These issues, according to Moody, could result in residents being able to fight against paying the income taxes and/or paying less than Council is expecting.
In regards to the ordinance requiring income tax for gambling winnings, Moody said the wording is overly broad because it simply says prizes and awards. He said that could allow for the taxing of scholarships and similar awards. He said he just because the current administration understands the spirit of the law, it does not mean future officials will have the same understanding.
Moody also explained that because Council is classifying winnings as qualifying wages, it leaves the ordinance up to interpretation and may allow for deductions for losses. In addition, he said the wording of the ordinance, once combined with a previous tax ordinance, could allow for the interpretation that gambling winnings have been subject to taxation since 2004, a year when a previous tax change was enacted.
Moody said there are other communities that have enacted better, clearer ordinances requiring taxes on winnings.
Finally, Moody said that the ordinance passed several months ago reducing the tax credit for those people living within the City, but working outside the City, was flawed. Using an example, he said the way the ordinance is worded should result in people paying less in tax than Council expected.
Council members had no questions for Moody and did not say if they would take another look at the two ordinances.
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