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Reviewing loopholes

BUDGET ADVANCES-01The Ohio Senate Finance Committee passed their version of the Ohio budget yesterday – June 17th – in the early evening. One Democrat Amendment was agreed to by majority Republicans.  The content of the amendment will create a tax expenditure review commission in the state of Ohio. This new committee will review tax loopholes periodically to see if they are accomplishing their purpose or a tax give-away to the politically well connected. This is a policy the Governor originally proposed in his budget and has long had public support from tax policy experts from the left and the right.

This is a small victory compared to tax cuts of $1.7 billion that should be invested in schools, local governments, and infrastructure. Hopefully the tax expenditure review commission will review poorly targeted tax credits and loopholes – such as the expansion of the business tax cut proposed by the Ohio Senate – and realize that it is ineffective at job creation, leads to an unfair administration of Ohio taxes, and may lead to tax avoidance.

SENATE BUDGET RELEASED

BREAKING NEWS-01The Ohio Senate provided a quick glance at their budget priorities on Monday morning. Once again, the Senate is doubling down on tax cuts that will primarily benefit the wealthiest Ohioans, instead of investing adequately in great public services that strengthen our communities.

Background:
In February, the Governor proposed a massive tax shift that would have raised nearly $5 billion in new revenue to pay for a $5.5 billion tax cut. This plan would have raised taxes on low and middle income Ohioans to pay for a tax cut for the wealthiest.

In April, the House rejected that plan and passed a 6.3% income tax cut – instead of investing to reduce tuition, provide more affordable housing, or fix Ohio’s crumbling infrastructure. We could do a lot with a billion dollars. While new taxes on low and income Ohioans were removed, the tax cut focus remained.

The Senate wants to increase the House tax cuts for businesses and keep the 6.3% income tax cut. In all, the Senate will forego $1.7 billion in revenue that could otherwise be invested in opening closed recreation centers, fixing our roads, or adequately funding our education system. The Senate will also raise tobacco taxes by 40 cents a pack and were unable to reach a compromise on Ohio’s severance tax.

Senator Shannon Jones sponsored an amendment that was included to restore healthcare funding for pregnant women up to 200% of the poverty level. There will be additional money placed into higher education, and the Senate will guarantee that no school district loses funding next year. However, the details of these plans have not been released for us to know what is going to be cut, and how these funds will actually be allocated. Follow us on Twitter for more updates. 

70% don’t know…

execs dontknowWe have all heard politicians claim that tax incentives, cuts, and loopholes will encourage business to grow in our communities and hire more people. The problem is, it just isn’t true.

New research out today finds that only 30% of business executives actually knew they were receiving a tax credit for “engaging in qualified job creation, machinery and equipment investment, research and development investment, and other activities in the state.”  

When we think about it fully, this makes sense.  Businesses will hire more staff only when they need additional people to meet demand, not because they have extra cash laying around. That extra cash from the incentive is profit. Businesses continue to report that access to a highly skilled workforce, infrastructure, and markets are the common needs considered in location decisions.  In the analysis, on a scale of 19 factors, business executives ranked tax incentives as 15th (those not receiving the credit) and 16th (those receiving the credit).

We need all businesses to pay their fair share, instead of creating loopholes for those with good lobbyists.

House passes Ohio budget

BREAKING NEWS-01The Ohio House of Representatives passed HB 64 on Wednesday April 22nd by a mostly party line vote 63-35. The legislation builds on a decade of  income tax cuts that primarily benefit the wealthiest Ohioans.  The cost of the 6.3% income tax cut is $1.2 billion over the biennium.  Since 2005, Ohio has cut the income tax repeatedly, and Ohioans have fewer jobs, smaller paychecks, and a higher poverty rate. We could make major investments into education, infrastructure, public health, and other great public services that strengthen our communities.

We are also disappointed that the Ohio House removed language establishing a tax expenditure review commission and an appropriate severance tax. The Ohio Senate now has the opportunity to build on the House’s work related to investments in education (including pre-K and higher ed), local government, and community services.

What is TPP?

SCHOOL CUTS-01Ohio House Republicans introduced their budget amendments earlier this week, and held three days of public testimony. Many parents, students, and school administrators showed up to testify against the elimination of TPP reimbursements.

TPP stands for Tangible Personal Property, which refers to a type of property (such as machines in a factory) that would be subject to local property taxes. As a part of the 2005 tax reform package, the state eliminated property taxes on tangible personal property. This dramatically reduced the amount of taxable property in most school districts, leading to major losses of revenue.

In 2005, policymakers recognized that this would put a huge hole in many school districts budgets and promised to reimburse local communities for those lost funds. However, those reimbursements have been reduced from the original promise, and the Governor’s budget proposed eliminating those funds. The House modified the Governor’s proposal, but 93 school districts still lose money.  When the state has a budget surplus – how can we justify cutting funds for our schools?  The state will use this money to finance an income tax cut for the wealthiest Ohioans – leaving local communities to cut services to students or increase local property taxes.

 

Ohio can do Better

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16% of Ohioans are in poverty.

Nearly 2 million Ohioans struggle to put food on the table.

Tuition is rising, and

Paychecks are stagnant.

The Ohio House introduced their version of the budget earlier this week and they continue to follow the same failed strategy – tax cuts that will primarily benefit the wealthy. The House Republicans proposed a $1.2 billion income tax that will prevent the state from addressing poverty, reducing tuition, and fixing our failing infrastructure.

Write your legislator a quick email and ask them to invest in our communities and not tax cuts that simply don’t work!

Digging in on the Budget

6OF7 AGREE-01
Tax Commissioner Joe Testa testified on Tuesday in front of the House Ways & Means Committee on the tax changes in the Governor’s budget proposal.  This committee will dig in on the tax changes offered. He begins his written testimony with a summary of one word – Jobs. The testimony and questions centered on how to best help Ohio’s businesses with our tax code and the committee continued to echo a growing theme around tax shifting.

Commissioner Testa advocated once again for lowering the income tax in Ohio in hopes of making Ohio more ‘competitive’ and attracting jobs. However, this theory is questionable at best. Claims that people will move from one state to another, because of taxes, are highly flawed.  Most research (6 out o 8 studies published since 2000 on the subject) has found that state taxes have little to no impact on The economy of a state.

Most small businesses will start their business in the community where the owner lives. When businesses do make location decisions, the top factors considered are infrastructure, educated workforce, and access to customers and suppliers. In addition, business owners want to live in good communities that have a high quality of life. You just can’t lure entrepreneurs with tax cuts.

Instead of more tax cuts, Ohio should invest in education, infrastructure, and guaranteeing strong public services that strengthen our communities. Research shows that a smart workforce is likely to attract high paying jobs into Ohio. We continue to struggle with under-investment in our schools, growing tuition, and a 16% poverty rate. Ohio can and must do better.

Make a difference! Over the next few weeks, the Ways and Means Committee will continue to debate and discuss this legislation. They want to hear from you – CONTACT YOUR LEGISLATOR TODAY!

Governor proposes massive tax shift

style2_Taxshift3-01Governor Kasich released his budget proposal yesterday, continuing a 10 year strategy of income tax cuts that primarily benefit the wealthy. This strategy has not worked – leaving Ohio with fewer jobs, smaller paychecks, and fewer resources to invest in our neighborhoods and communities.

The budget proposal includes a 23% income tax rate cut that will benefit the wealthiest Ohioans, while increasing sales taxes on everyone. There are some modest improvements to Ohio’s tax policy, but these small changes are extremely limited in comparison to the billions of dollars proposed in this tax shift.

The budget also includes modest investments and and modest budget cuts. Ohio has serious needs including a 16% poverty rate, high levels of childhood hunger, and crumbling infrastructure.

One Ohio Now will continue to work on interpreting the state budget over the coming days, weeks, and months. Follow us on Facebook and Twitter

DRAFT SCHEDULE

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Representative Smith, Chair of the Ohio House Finance Committee released his draft timeline for the Ohio budget.

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Tax Rankings: an unhelpful measure

Don't be tricked by tax climate rankings

The Tax Foundation released their “Small Business Tax Climate Index” (SBTCI) earlier this week, and Ohio ranked 44th – down a few spots from last year. The Tax Foundation, founded in 1937 in opposition to progressive proposals, bases their rankings on 115 features of tax law that it weights in order to generate a single number to rank states.

We shouldn’t give too much weight to this measure, because the number doesn’t paint an accurate picture for policymakers or businesses. Instead, Ohio should invest in great public services that strengthen our communities.

SBTCI is flawed:

1. Rankings are not connected to taxes paid: The rankings measure an abstract of ‘business competitiveness’ not the tax load or taxes paid by business in each state. The Council on State Taxation (COST) calculates the taxes paid by businesses in each state. As a share of gross state product, Ohio businesses pay a rate of 4.1% (in state and local taxes) compared to a national average of 4.7%. READ MORE ON THE FLAWS IN TAX RANKINGS

2. Rankings exploit minor differences: Most businesses will pay a similar total tax rate regardless of which state they operate.  States, however divide up their taxes differently between business, individual, income, sales, and property taxes.  Yet, the weights applied by the Tax Foundation increase the impact of an income tax on the ranking. Ranking the income tax is misleading, because 31% of all business taxes paid in Ohio (state and local) are in the form of property taxes. Corporate and personal income taxes paid by businesses are about 12%.

3. Ideology drives rankings: The Tax Foundation assumes that low and flat taxes are the best for job growth – even though much of the research disagrees.  Every business is taxed differently by the state and local communities. Drawing a single ranking conclusion is not helpful for businesses or policymakers looking to develop effective, efficient, and fair tax systems. In the end, the rankings highlight a political and ideological goal of cutting taxes and reducing public services. They do not set a road map for a more prosperous Ohio that gives every Ohioan an opportunity to succeed.

A new approach: 

Research also shows that state tax policy has little to do with economic growth, but smart public investments are the foundation of a strong economy.

Ohio should look at the rankings that matter most to people – safe neighborhoods, quality of our schools, a healthy environment, and other factors that impact our lives.  Ohio will succeed in growing our economy by improving our schools, making neighborhoods safe, and making sure we have great public infrastructure. Instead of tax rankings, we should race to win on measures that matter to all Ohioans.