Tax Cuts Questioned

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leg letter 5Should Ohio’s primary goal focus on cutting the top marginal income tax rate (impacting 2-3% of Ohioans), or should we focus on how to build a strong economy with safe neighborhoods, great public schools, and enough jobs for everyone.

Newspapers across Ohio question the tax cut goals.  The Columbus Dispatch wrote that only .4% of Ohioans pay over 5% and people left Ohio for warmer climates – not income tax rates. The Cincinnati Enquirer and Toledo Blade ran Opinion Editorials questioning the efficacy of tax cuts, and the Brent Larkin of the Cleveland Plain Dealer wrote a great piece highlighting the choice before Ohioans. We can invest in real economic growth strategies such as lower tuition for Ohio’s colleges and providing preschool to more kids. Likewise, legislative leaders on both sides of the aisle continue to express concerns around funding programs to treat opiate addiction, preschool access, and collaboration to provide resources for local governments. Other legislators even question the regressivity of the recent tax reform package.

After nearly a decade of tax cuts, Ohioans have not felt the impact. Ohio passed a massive 21% income tax cut package in 2005 and since then Ohio has lost jobs and the nation has gained. Simply put – tax cuts don’t create jobs. We want good middle class jobs in Ohio. This doesn’t mean jobs should shift across the boarder into Cincinnati from Kentucky but we should invest in developing a world class education system and foster community ingenuity to create jobs.

Click if you agree: Ohio should invest in our communities over tax cuts that primarily benefit the wealthiest Ohioans!

News & Notes March 21, 2014

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Screen Shot 2013-07-23 at 9.22.50 AMHAPPY FRIDAY!

News: How Ohio fails community college students, Akron Beacon Journal 
Notes: The Governor’s top priority continues to focus on the income tax rates for the richest .4% of Ohioans. Maybe it is time that we focus our attention on the thousands of college students that need an affordable education. 

News: Aliens or Tolls are Necessary to fund new Brent Spence Bridge, Channel 9 WCPO Cincinnati
Notes: The Governor unveiled a $2.4 capital budget earlier this week, however he did not allocate funding for the new Brent Spence bridge that will improve infrastructure and traffic into Ohio from Kentucky. This is another step to make Ohio’s tax system more regressive – and shifting the cost of public services away from the wealthy. 

News & Notes March 20, 2014

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Screen Shot 2013-07-23 at 9.22.50 AMNews: Kasich’s proposed budget would provide more for prison staffing, repairs, Columbus Dispatch
Notes: A small increase is better than none at all, Ohio needs an additional 400 prison guards not just 87 – which is provided in this budget bill. Ohio has the resources to invest in creating secure prisons and promoting rehabilitation, but every time we cut the income tax we take a step back. 

News: Expanded Medicaid won’t save Ohio promised $400 million, Columbus Dispatch
Notes: Fiscal responsibility requires legislators to be responsible and not count their chickens before they hatch. SB 210 wanted to push through an income tax cut based on this additional funding that is not going to materialize. Ohio policymakers need to be cautious and not rush to tax cuts without considering the long-term fiscal detriment they will have on our communities. 

 

News & Notes March 19, 2014

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News: Tax cut defines Kasich’s budget review, but other ideas matter more, Cleveland Plain Dealer:
Notes: The Editorial Board highlights that their is ‘scant evidence’ that income tax rate cuts will help Ohio’s economy and address the totality of the MBR. 

News: With Higher Taxes, How Many Smokers Would Quit, Cincinnati Enquirer
Notes: A 60 cent increase will have a minimal public health benefit. Many public health advocates argue for a larger increase to promote cessation efforts. In addition, none of this new revenue will be invested into cessation efforts, despite a CDC report that shows Ohio needs to invest about $145 million. Senator Bill Seitz, (R-Green Township) also raises an issue of regressivity – that this new tax will primarily impact low income Ohioans to finance an income tax cut for the wealthiest Ohioans. 

News: Lt. Governor Candidate Blasts Kasich Tax Proposal, City Beat
Notes: Lt. Governor candidate Sharon Neuhardt discussed the proposed tax cut package in the MBR – highlighting that it will not benefit low and middle income Ohioans.

News: Kasich unveils $2.4 billion construction budget, Dayton Daily News
Notes: The Capital Budget uses bond revenues to finance infrastructure projects across Ohio. The Governor advocates that this bill will create jobs and improve our communities. It is important to note that the scale of this bill is relatively small compared to the general revenue fund and these investments are  a similar amount to the income tax cut proposed in the MBR. 

 

News & Notes March 14, 2014

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Screen Shot 2013-07-22 at 9.20.51 AMNews: Fight over tobacco taxes begins in Ohio, Dayton Daily News
News: Ohio Gov. Kasich’s tobacco tax plan praised, scorned, Toledo Blade
Notes: Public health advocates support the increase in tobacco taxes to reduce the number of smokers. From a public health standpoint – this makes a lot of sense. However, from a tax and budget standpoint, an increase in tobacco taxes will reduce revenue in the future (as people stop smoking). Over the years, tobacco taxes continue to decline as fewer people smoke. New revenue from tobacco taxes should be used to offset the regressivity of our tax structure or invest in public health expenses that result from smoking. 

News: Governor calls for $53.5 million in new prison spending as inmate population grows, Plain Dealer
Notes: The MBR will invest new money into our corrections – primarily to for ‘institutional operations’. This will mean the creation of about 87 new jobs as prison guards. OCSEA estimates that the need is much larger, and Ohio actually needs about 400 new prison guards to address the current incarceration levels. Instead of another income tax cut, we could hire the professionals needed to address the need, and invest in efforts to prevent recidivism at the levels needed. These public investments will go farther in improving Ohio than another income tax cut. 

News: Ohio loses on big oil, natural gas bids, NBC4
Notes: Governor Kasich is absolutely correct that Ohio’s business taxes and proposed severance tax increase did not cause Ohio to lose these contracts. Very rarely do businesses make location decisions based on tax rates. Instead, they look at many other factors, costs, access to materials and a skilled workforce. We need to build our skilled workforce to develop our own businesses instead of competing with neighboring states. 

News: Schooling the Governor, Toledo Blade
Notes: College is expensive. If we make it less expensive, more students can attend, have lower debt, and begin their adult lives sooner. Sadly, the Governor and many others are focused on the theory of income tax cuts make jobs. Sadly, a high quality workforce matters more than a 2.2% or 2.4% effective income tax rate. 

News: Kasich’s tax reform proposals may take some selling, but insiders, experts say persistence will sway governor’s fellow Republicans, Plain Dealer
Notes: Raising revenue on the left hand to cut the income tax on the right hand. Let the debates begin. 

Major Changes Proposed to Ohio’s Budget

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MBR tax cuts

The Mid-Biennium Review (MBR) contains three tax cut proposals. The first tax cut targeted at low income people is an expansion of the Earned Income Tax Credit (EITC). The second proposal is an expansion of the personal exemption for people making less than $80,000 a year (middle income). Finally, the most expensive proposal is a phased in 8.5% cut to personal income tax rates which benefits the wealthiest Ohioans the most.

 

 

 

EITC: Total $94.2 million
Fiscal year 2015: $29.9 million
Fiscal year 2016: $31.4 million
Fiscal year 2017: $32.9 million*

Personal Exemption Expansion: Total $426 million
Fiscal year 2015: $142 million
Fiscal year 2016: $142 million
Fiscal year 2017: $142 million

Personal Income Tax Cut: Total $2.186 Billion
Fiscal year 2015: $461 million
Fiscal year 2016: $816 million
Fiscal year 2017: $909 million

All data from the Legislative Services Commission analysis of the MBR (HB 472)
*LSC did not provide a 2017 estimate of the cost of the EITC so this is an estimate.

**There is overlap in the EITC and the personal exemption credit. Without refundability of these credits, there will be less benefit to low and middle income individuals than might be inferred by combining the numbers above. If both the personal exemption and EITC are implemented, the anticipated cost is $453 million over three years.

 

News & Notes March 13, 2014

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Screen Shot 2013-07-23 at 9.22.50 AMOn Wednesday March 12, Budget Director Keen and invited cabinet level officials to present alongside him for the Mid-Budget Review (MBR). Keen described cost savings from restructuring of state debt and minor new investments – primarily designating funds within departments for specific projects. The major component of the bill is a $2.1 billion tax over 3 years that will primarily benefit the wealthiest Ohioans. While the plan raises new revenue in some good ways to pay for the tax cut, Ohio does not need anymore income tax cuts that have not worked for Ohioans.

Cutting Words, Akron Beacon Journal Highlights the need for public investments over more failed tax cuts.

Serving a Bigger Vision, Columbus Dispatch Editorial Board Ignores the critiques of tax cuts and continues to believe that they will bring more jobs.

Oil and Gas Drillers once Again Protest Kasich Tax Hike, WKSU Drillers don’t approve of the Governor’s 2.75% proposal for a severance tax – especially alongside the CAT increase. It is important to remember that 80% of this revenue is used to offset an income tax cut – primarily benefiting the wealthiest Ohioans.

Kasich’s Proposal provides much to discuss, Columbus Dispatch Provides a quick list of some of the small policy changes that are the bulk of the actual bill. Most of these items are nominally related to an actual budget.

Batchelder leery of Fracking Tax Hike, Columbus Dispatch Speaker Batchelder indicates caucus support for a cigarette tax increase, some support for the increase in the Commercial Activity Tax, and he has little support for an increase in the severance tax. He predicts more than 11 bills and is unsure whether the House will finish work by April 10th spring break.

Proposed tobacco tax hike debated by groups, Akron Beacon Journal Chairman McClain says that the MBR may be divided up into as many as 15 bills.

Grover Norquist’s Americans for Tax Reform finds Gov. John Kasich’s tax plan ‘less than inspiring’, Plain Dealer, Norquist is against tax increases to pay for income tax cuts. He would rather cut the income tax and cut services immediately instead of waiting for the unsustainable revenue to fall.

Kasich Defends Cigarette tax, Dayton Daily News Kasich says that the money for an income tax cut has to come from somewhere. ‘And if you cannot get them done right away, that’s fine.’ Ohioans need to ask, why do we need to cut the income tax anyways?

Kasich’s Tax Plan Faces Tough Legislative Test, Toledo Blade Rep. Terhar asks what it would take to keep the tax cut but lose the tax increases during a hearing on Wednesday – indicating a possible tepid reception in the House for this proposal. Senate President Faber draws distinctions on how the Commercial Activity Tax impacts different businesses.

With Kasich’s MBR, tax policies are front and center in race for governor: Ohio Politics Roundup, Plain Dealer, An overview and compilation of the tax plan proposed. “Let the Debate begin”

MBR PRESS RELEASE

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press release***************

The Governor and legislature are clearly able to come up with large amounts of new revenue for top priorities.  However, we believe more revenue is needed to restore the Local Government Fund, invest from pre-K to higher ed, and take on poverty and the opiate epidemic at the scale of our state’s needs.  Instead, we’re troubled by an ongoing and unfounded focus on more income tax cuts that have already cost the state billions without leading to promised jobs and growth.

Overall, the plan will lead to $170 million more in state cuts – meaning more cuts to public safety, schools, and other great public services that lead to stronger communities. The plan is fiscally irresponsible, swapping stable, progressive revenue for sources like the severance tax that are still largely hypothetical, and passing unpaid-for cuts to the next legislature.

No matter what you think of the cigarette tax, it will hit poor and working people to give a tax cut to those who need it the least.  Income tax cuts benefit the wealthy the most.

Revisiting the Commercial Activity Tax (CAT) and severance tax to ensure corporations are paying their fair share makes sense, but not to replace the income tax.

Good ideas that make our revenue system more fair – like expanding the Earned Income Tax Credit (EITC) – should remain to improve our already regressive revenue system.

 

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News & Notes March 10, 2014

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Screen Shot 2014-03-10 at 9.14.50 AMNewspapers around Ohio discuss the Mid-Biennium Budget Review (MBR) that Governor Kasich is likely to release this in the next couple of days.  The media asks how will the administration pay for a $600 million tax cut – cut services or raise revenue or a combination of the two?

The Governor will attempt to raise revenue in order to pay for a tax cut. While this plan may raise revenue in some good ways, it does so for the wrong reasons. If the newspapers are correct, this is a tax shift that will benefit the wealthy.

News: Kasich must sell his new tax cut plan to GOP, Columbus Dispatch
News: Ill-advised tax cuts aside, Ohio Gov. John Kasich’s mid-budget correctives offer a useful chance to fix policy: editorial, Cleveland Plain Dealer
News: Smokers may pay for Kasich’s tax cut, Columbus Dispatch
News: Governor wants top income tax below 5%, Cost to state is $600 million, Toledo Blade

News & Notes March 7, 2014

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News: Legislature won’t go crazy on severance tax rate, Hannah News
Notes: Representative David Hall discusses the proposed severance tax bill (HB 375) with the Ohio Oil and Gas Association. The bill proposes a rate of 2.25% with many exemptions and credits. According to Hall, the Governor might propose a rate of 2.75% to finance another income tax cut. We have the need for many investments in Ohio, and do not need further income tax cuts. Many groups have advocated for the severance tax to finance the costs of regulation, capping orphan wells, and economic stability for the region now and into the future. These ideas all serve Ohioans better than another income tax cut. 

Screen Shot 2013-07-23 at 9.22.50 AMNews: Ohio Business Climate on the Right Path, Dayton Business Journal 
Notes: Site Selection Magazine once again gave Ohio high marks for “business climate”. Despite claims to the contrary, Ohio already is a friendly place to do business, and has been a friendly place for business for a long time (regardless of income tax rates).  Businesses are most attracted to states where they will have a well trained workforce, technology access, and close to their markets. Also, business leaders want to live in communities that are nice and affordable places to raise their families. Ohio should invest in these areas to attract businesses, not more income tax cuts. 

News: John Kasich hints at coming proposals on welfare, business regulations, Columbus Dispatch
Notes: The Governor will release his Mid-Biennium Review (MBR) next week and Budget Director Keen will address the Ohio House of Representatives on Tuesday.  The Governor’s main goal in this process is to reduce the  top income tax rate below 5% on incomes over $208,500 a year. This will cost Ohioans hundreds of millions of dollars that would be better spent on our schools, parks, community safety, and social service programs.