Gov. John Kasich says his
budget proposal will cut taxes, make Ohio a better place to do business and improve funding for education.
Not so, say Statehouse Democrats, who contend the Kasich plan will bring tax relief to those who need it least, broaden taxes on a host of basic services and aid wealthier school districts more than poor ones.
The truth appears to lie somewhere in between. But the battle lines are clearly drawn between the Republican governor and the Democratic minority in Columbus, which lacks the votes to block his budget but can make a great deal of noise before it is enacted.
Kasich stresses that lowering taxes on businesses and individuals will help create jobs by improving the overall climate for business in Ohio, which he believes has a reputation as a "high tax" state. His budget proposal calls for a 20 percent cut in the state income tax over a three-year period, a 50 percent tax cut for small businesses and a reduction in the state sales tax.
Democrats say that the tax cuts the governor proposes will disproportionately benefit wealthier Ohioans and that the slight reduction in the sales tax he is planning will be more than made up for by the service taxes he is proposing.
According to the Institute on Taxation and Economic Policy for Policy Matters Ohio, taxpayers in the upper 1 percent of the income spectrum, those who earned more than $335,000 in 2012, would see their taxes reduced by an average of $7,777 per year, while middle- income wage earners, who made between $33,000 and $51,000, would see their taxes reduced by $144. Those who earn more would gain more.
Kasich's plan would impose sales taxes on professional services, including lawyers, lobbyists, accountants and advertising, as well as other services, including bail bonds, magazine subscriptions, music and book downloads, bowling rounds and land surveyors. While the governor touts a 0.5 percent reduction in the state sales tax, Democrats say the additional taxes on services will actually mean a net increase in sales taxes for Ohioans.
Another sticking point is the state's rainy day fund, the emergency reserve set aside to cover unexpected economic contingencies. With the fund projected to reach $2 billion this year, Kasich proposes an automatic tax cut. Democrats say the money would be better invested in areas that have sustained serious cuts in the state funding in recent years, such as the local government fund. They argue that cuts in state support for local government services has led to increased demands on voters at the local level, who have ended up footing the bill for what the state has cut.
As the Ohio House began hearings on the budget last week, Office of Budget and Management Director Tim Keen said the budget reflects Kasich's "belief that the personal income tax reduction is productive for our economy." Taxation "that punishes income," he said, "is a disincentive for capital investment in the state of Ohio."
Democrats don't buy that. State Rep. Chris Redfern, who is also Ohio Democratic Party chairman, says he "unequivocally" opposes Kasich's plan and would urge his House colleagues to follow his lead. Whether their opposition will result in any modification of the governor's budget package remains to be seen. In the meantime, expect a lively debate.