CINCINNATI — Hamilton County Auditor Dusty Rhodes is challenging the city of Cincinnati in court, accusing the government of breaking its own laws.
His lawsuit argues that the city should not be collecting the earnings tax from people who work for a Cincinnati-based company if they are doing that work remotely, outside of city limits. The tax funds a majority of the city’s budget — close to 70% and pays for the operating expenses of police, fire and trash collection.
The Ohio General Assembly gave cities the ability to temporarily collect earnings taxes in this manner during the coronavirus pandemic
Rhodes believes there are people who shouldn’t have been paying the taxes over the past year. If he wins the lawsuit, it’s possible that if someone paid the earnings tax for work that was done while working outside the city, they could get that money back.
"I think there is something inherently wrong about a city reaching outside of its limits and taxing people who aren't living there and working there," he said.
This is why Rhodes filed the lawsuit, accusing the city of overtaxing people and violating its own municipal code.
“The city didn’t change their law to allow it,” Rhodes said. “So, legally, they don’t have a leg to stand on.”
The city’s budget is primarily funded by a 1.8% earnings tax. Under city code, that can only be charged to people working inside the city limits. The state legislature passed a temporary measure during the pandemic allowing cities to continue collecting the tax from people working remotely for companies based within city limits.
“The city’s own code says earnings tax is only imposed upon income that is earned while working in the city,” Rhodes’ attorney, Curt Hartman, said. “These residents for the last year and a half have not been working in the city, have not been taking advantage of or using that city’s resources. There are no rationale under the law by which they should pay for those services.”
David Mann, the chair of Cincinnati’s Budget and Finance Committee, disagrees with Rhodes.
“When they weren’t able to work downtown, the fact is the expenses to the city maintaining the street, keeping the city safe from crime and so forth, those obligations continue,” he said. “My buddy, Dusty Rhodes, while he was working at home, we were keeping downtown safe for him when he decided to come back to work downtown.”
The Buckeye Institute, a nonprofit research group, filed a similar lawsuit in February 2021. A judge dismissed that case in early June 2021. However, the case is being appealed to Ohio's First District of Appeals.
Ohio Gov. Mike DeWine ended the state’s emergency COVID-19 orders June 18. The city of Cincinnati’s ability to continue taxing the remote, out-of-city workers ends 30 days after that, on July 18.