Summary: In 1977 Rittman, Ohio was authorized to collect 1.5% local income taxes until 2007. But they dropped the end date when they modified legislation in 1997. The tax rate should have fallen to 1.0% in 2007 but it didn’t. Oops. So if you averaged, say $50,000 income for those years you overpaid by $3750. And that’s not including any interest. The city’s response?
“Sorry. We can’t afford to pay you back”.
I think the citizens need Tim Misny (Cleveland hard nosed lawyer whose slogan is “I’ll make them pay!”)
If/when they lose the lawsuit, they’ll have to raise taxes and/or reduce city services to cover the judgement. I think it’s common to issue bonds in situations like this?
I bet it’s not the only one. This seems like a pretty natural consequence of granting independent taxing powers to ~900 different entities (many of which are even smaller than Rittman).
I don’t think they could get away with raising taxes, and then… pay back the taxpayers with the money raised.
IANAL, but I am thinking the only proper mechanism is to cut services, and use the money saved on that to pay back the taxpayers over 15 years or whatever. The pay back doesn’t have to be an actual pay back, though. Probably best to simply implement a discount on each tax bill for the next 15 years. Put another way: over the last 15 years, the people paid more in taxes, and received more services. For the next 15 years, people will pay less in taxes and receive less services.
Not sure about the facts here. A law was enacted in 1977 saying the city could collect a tax for a thirty year period. A new tax code was released in 1997 which removed the end date for that tax.
Did the 1997 act overrule the 1977 act? If so, then this sounds legal.
There is some logic to doing it that way. The set of taxpayers who overpaid won’t be the same exact set who will end up footing the bill if there is a judgement against the city.
I don’t think there was a 1997 act. In 1997, the 1977 ordinance was copied and pasted into a new compilation of the tax code, but part of it was omitted. The 1977 ordinance was still the actual law, but people were only ever looking at the book printed in 1997 to see what it said.
I don’t see wha’t logical about it - there is no fairness in this. The past residents who overpaid at least got the benefit of the services paid for by those revenues. If future residents have to pay for the error through higher future taxes, they get nothing in return.
Yet that’s the logical consequence. They would be suing themselves.
Or worse - having benefited from the extra services funded by past taxation, and implemented by an administration they voted for, they would be seeking an arbitrary and unjust transfer of money from people who were not responsible for the error (current and future taxpayers) to themselves.
It’s analogous to every retired person asking the U.S. government to write them a large check for some spurious reason and to fund it by increasing income tax for everyone else.
Surely the way you would handle paying back taxes you overpaid would be to use tax credits, right? Let people deduct the amount they overpaid, up to a certain amount and over a certain period of time.
Sure, that does mean less revenue, and that could result in taxes increasing, but surely those tax increases would have to be agreed upon by the people.
That doesn’t stop it being a zero-sum game. The money is spent, it’s gone. The only way to pay people back is through an unjust transfer from other taxpayers who had no part in making the error and did not benefit from the error.
The only justification for any compensation here would be if the city had used past taxes to acquire capital assets or make capital improvements from which future taxpayers would benefit.
But that’s unlikely to be the case, the money was probably spent on services.
I don’t agree. For one, the other taxpayers did benefit, because their taxes would have previously been lower for the same services they agreed on.
For another, those other taxpayers would be free not to pay increased taxes. They just get to decide what services they wish to pay to support, just as they did before.
Sure, revenue would decrease. But it should only decrease to exactly what was legally agreed upon. It’s up to that taxpayers as a whole to decide if that legal agreement is not enough.
That’s not to say that there is no harm caused by this, particularly if things are not smoothed out. The timing of when you get money does factor into the results. But I don’t see any unjust transfer of wealth.
I don’t know what this is supposed to mean. The only meaningful distinction is between people who were past taxpayers (and may leave) and people who are future taxpayers (new arrivals).
To the extent these two groups overlap (people who never move) then people are literally suing themselves and it is a pointless exercise.
