Politicians against tax simplification: only in Ohio

When it comes to designing interfaces for software or websites, there is a simple test to see if you are doing things right: If it needs explanation to the user on how it works- it’s probably not optimal. If there are penalties extended for doing it wrong- then you have even more reason to go back to the drawing board.

I’ve recently been arguing with the state about fines levied in 2005 and 2006 on my business- not for not paying a tax, but for not filing a year-end form telling the state how much I paid. The penalty is almost double what my small business paid in taxes. What’s worse is that I also paid my accountant in 2009 to rectify this situation which we thought was resolved then. We’ve wasted countless hours on this- partially because the state misapplied a payment.

The fact is, our tax system is overly complex and an unnecessary added cost to small business that could easily be resolved by using some simple principles of interface design- which are brilliantly explained by the title of a classic book on the subject: “Don’t Make Me Think” by Steve Krug.

To solve the problem the state is claiming they have with my filings is simple, if there is a form that needs to be filed- you shouldn’t be able to file anything else until you are in compliance, much like the video store doesn’t let you rent another movie until you’ve returned the last one or paid a fine.

In fact, the idea that we need city, state and federal portals for tax filings – or payroll services to “manage” this process is testament to how badly designed our system of collecting taxes is. One portal, where you enter your Federal Tax ID number- and everything should be able to be reported and paid in one place ( I wrote about this in 2008 when President Obama asked for ideas on how to make things better: Obama asks? Esrati Answers: How can the next president better help small business and entrepreneurs thrive?)

Yet, in backassward Ohio, the only state to have municipalities collecting income taxes, a proposal to simplify this at the state level is meeting opposition:

Municipal leaders throughout Ohio are concerned that efforts to simplify the hundreds of different tax forms into a single universal form are part of a shift to consolidate collecting the taxes through one agency. Cities say this could impact its operating budgets and create hardships for its taxpayers…
The Ohio Municipal League is leading opposition.

More than 100 cities and villages have passed resolutions to oppose any plans to prevent it from collecting the tax, according to the league. In the Miami Valley, cities and villages on record include Carlisle, Centerville, Clayton, Englewood, Franklin, Greenville, Hamilton, Huber Heights, Kettering, Lebanon, Mason, Miamisburg, Moraine, Oakwood, Piqua, Riverside, Springboro, Springfield, Tipp City, Trenton, Troy, Vandalia and West Carrollton.

via State wants to consolidate collection of city income taxes.

Note, Dayton isn’t one of the cities in the list. The reality still stands that we have way too many mini-fiefdoms in Ohio-  too many elected officials, too much duplication of services and a ridiculous patchwork of laws and rules to confuse and confound which  is a big part of the reason the state of Ohio isn’t considered business friendly and the overhead of government is high here.

The fact that politicians even argue against these kind of obvious improvements show how out of touch they are with what it takes to run a business and work within the system that they create.

It’s one of the reasons I’m running for Congress, and if you agree with what’s in this post- please consider donating to my campaign. Note, if you go to any of my opposition’s sites- you won’t find posts going back years talking about these subjects. Thank you.

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9 Responses

  1. Bubba Jones January 31, 2012 / 9:23 am
    It’s been a long time since I’ve agreed with most of one of your posts, David, but you do have a pretty good point with this topic.  But, can you fully explain what you mean by the following:
     
    >>> To solve the problem the State is claiming they have with my filings is simple, if there is a form that needs to be filed- you shouldn’t be able to file anything else until you are in compliance, much like the video store doesn’t let you rent another movie until you’ve returned the last one or paid a fine. <<<
     
    I don’t want to jump to any conclusions about your idea so I’d like a fuller explanation of what this means.
     
     
     

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  2. Gary Leitzell January 31, 2012 / 9:42 am
    [MARKED AS SPAM BY ANTISPAM BEE | CSS Hack]
    I believe that the main reason for this is the fee that the state wants to charge the municipalities for providing the service. Those municipalities on the list can collect their income taxes for less money than the state will charge them to do the same job. In this case I think you will find that it is basic economics at play.

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  3. David Esrati January 31, 2012 / 9:56 am

    @Bubba-

    I’ve talked about this before- more than a few times. When you’ve completed your online business registration that goes with your EIN- which would include the form of business you operate under (CCorp, LLC, Sole Proprietorship etc) and your SIC and NAICS codes- you’d also enter your employees names (to confirm their citizenship status, nach) and your size standard-  and you would automatically be provided with a punch list/calendar of required filings and dates.

    Payroll would be entered as required- with tax witholdings- and calculated automatically- and instead of having a patchwork of child support collections portals- it would all be handled in one place. If you missed a form or filing, you would be reminded each time you uploaded data or make a payment, and failure to remedy the solution would instantly begin a “counseling” process- instead of fine now- and debate later.

    Here is from another post:

    We need to simplify our tax code and payment and collection systems. For small businesses to have to go to a multitude of different government websites- from local to federal, to file paperwork and make payments on a schedule that only tax professionals can keep track of is criminal. We need a single site login with our federal employer ID- where we report our simplified payroll and tax info– so that we don’t spend more time trying to decipher what we owe, to whom and when. The amount of fines levied on small business because of complexity is criminal- the amount that GE doesn’t pay because they can afford tax-avoidance departments is also criminal- it’s time to simplify.

    via How to get small business moving, Mr. Immelt?.

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  4. Diane January 31, 2012 / 10:54 am
    David,

    Have you forwarded your observations and recommendations to Gov. Kasich’s office? He strikes me as very pro-reorganization, pro-simplification, and pro-small business. He’s not afraid to shake things up, either, or to think outside of the box. God knows Ohio has more than it’s share of small-minded boxes. Might be worth a shot?

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  5. David Esrati January 31, 2012 / 11:05 am

    @Diane- I’ve tried talking to his employees- who seem not to care.

    I actually once got the state to change their ways- they used to send out bid notices with instructions to go to the purchasing depts page- then look for a button- then type in this info-

    to- here’s a link to the RFP.

    I have the letter- where they try to explain why they did it- and then begrudgingly admit that my way is better and that they would comply, so, I’ll have to add this to my list of things to do.

     

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  6. Dave B January 31, 2012 / 7:51 pm
    Elected officials talk about cooperation and consolidation of services in order to reduce to cost of government and make government more effective. They just don’t do it. Talking cooperation is always popular. 
    You +1’d this publicly. Undo
    Doesn’t RITA (Regional Income Tax Agency) collect taxes for a number of cities now? On the other hand people could follow the lead of the Bellbrook and simply not have a tax on income and not have to incur the cost of staff to collect it or the frustration created by the forms.

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  7. truth February 1, 2012 / 11:51 am
    The reason that those cities want to remain neutral and collect their own taxes, quite simply for many of them, is because of RITA.

    There is a reason that Vandalia collects taxes from Brookville and Union.  There are also reasons why those communities, and Huber Heights, parted ways with RITA.  There was no accountability on RITA’s part, and the cities contracted with them found that their own collection resulted in higher revenue, even after paying to run their own tax divisions.

    Does the tax code need simplified?  Yes.  Is there redundancy?  Absolutely.  But certain ideas of tax collection need to be looked at the same way as regional dispatch.  Many communities would not have a problem with regionalization of certain aspects of government if they were run properly through avenues like with a Council of Governments.

    Taxation and dispatch are two totally different services, but they are both things that can benefit from regionalizaion.  Dispatch is the biggest form of regional cooperation that we have seen in some time in the Miami Valley.  Unfortunately, there are people jumping ship from that, due to the improper management of the center, the lack of accountability, and the increased costs that are being passed onto communities and entities.  Is it any surprise that Trotwood was the only non-county entity that stepped up in support of the increased cost?  No.  The have a high volume of calls for service and their taxpayers (citizens..as their taxpayers are few and far between) don’t hold their elected officials responsible.  Look at the shitshow of a local government they have.

    I don’t want to stray off the topic of taxation too far, but the regional cooperation in dispatch isn’t the gem that some thought is was going to be.  This also needs to be applied to taxation, as RITA was far from successful for many communities.  Just because the term “regional” is applied to something, doesn’t mean it is better for the cities or the citizens.

    Also…Bellbrook’s idea of no income tax may work well for them, but the ideas of no income tax and relying on property tax fail many townships.  You must be a bit “diverse” in your revenue streams so that one certain economic failure doesn’t ruin the services you should be providing. 

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  8. David Esrati February 1, 2012 / 2:18 pm

    @Truth- at a bare minimum- isn’t the county a trustworthy enough organization to manage income tax collection- if not the state? And if the State can’t be trusted- why do we bother with government at all?

    This idea that somehow- all these mom-and-pop tax collection stands is somehow better is bewildering.

    As to the regional dispatch of safety forces- it’s questionable if there should even be all these different jurisdictions in the first place. North Carolina and Florida both work these things on a county level quite well.

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  9. truth February 2, 2012 / 9:08 pm
    The problem is that many are against the county running things, because they have issues now.  In a perfect world, a CoG should be able to effectively run many things, with the proper accountability that a CoG allows you to have.
     
    I wouldn’t look at the state and feds as “trustworthy” agencies to collect anything.  Local collection allows for closer management of funds.  Ask local governments if they trust the state to collect certain state taxes.  They just ran roughshot with the local government fund.  Local entities don’t want their funds going anywhere central, with the hopes that they are returned in their entirety.
     
    If there is going to be accountability, every shareholder has to get a seat at the table.
     
    If regional/county forms of government worked out so well, why did the DDN shift from Louisville to Indy?  Over the long haul, they fail to provide the same amount of service to the whole, that the successful entities were providing for themselves in the beginning.  When it comes to service, I have a say so locally.  If certain services go completely regional, without my city at the table, they will not look out for my city’s interests…they will look out for their own.  If the county can’t manage a dispatch center effectively, under the original plan and cost, they why in the hell do you think anyone can convince the outsiders that the county can overtake projects/departments even more labor intensive than that.  They shot themselves in the foot for building a resume.
     
    Regional forms of government do nothing but distribute services away from those that have them, to those that don’t.  MCSO is a great example.  They are required to put contract cars in Harrison and Washington Twp., and the mandated car in Jefferson Twp.  Unfortunately for Jefferson Twp residents, the cars that are assigned to patrol their streets, are pulled to the busier Harrison Twp on a frequent basis, leaving Jefferson bare.  Now how fair is that to the citizens of Jefferson Twp.?  It isn’t.  They are promised a service that they rarely receive.  This small example goes to show what would happen if a service is regional.  The self sufficient areas, have their services sucked to the areas that can’t provide for themselves.  Regional cooperation benefits those that have like and similar circumstances.  Huber, Vandalia, and Tipp have NAWA.  Vandalia and Tipp have their own water.  These are successes because of the accountability that each community has to their people.  Communities like this also don’t want to cooperate with the failing parts of the county because it will only bring them down.  The same goes with the southern townships and cities.  Down south, two like and similar agencies merged fire services.  Because they have each other’s interests in mind.
     
    Until the core can prove that they can provide service that is equal to what the outsiders currently have, for the same or cheaper, you won’t see cooperation.  Nor should you.  If mergers were to occur, it needed to happen before Montgomery County looked like a doughnut.  You merge services and over the course of time, everyone fails.

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