Temporary state sales tax is best solution for debt
There's no question that Ohio's budget crisis is real. Just about every state in the nation is scrambling to make ends meet in an economy that's sputtering. But what is in question is how best to address a $720 million budget deficit this year and a possible $4 billion deficit in the next biennium that begins July 1.
Gov. Bob Taft has proposed a $2.3 billion tax plan that would increase the number of taxes paid by businesses, while lowering the corporate franchise tax rate for companies. The plan also would extend the current 5 percent state sales tax to everything from sales of homes, to storage lockers, to entertainment tickets, to tattoos.
The tax would also be applied to dry cleaning, cable and satellite television, local telephone service, pet grooming and real estate commissions.
In addition, Taft wants to raise the tax on cigarettes and alcohol and to increase fees for dozens of state services, including hunting licenses.
But the Republican governor is having a hard selling his plan to the GOP-controlled General Assembly. A growing number of legislators have voiced concern over the administration's picking and choosing items to be taxed, and they have rightly pointed out that taxing necessities at a time of an economic slowdown is unfair to the people of Ohio.
While we agree with the governor that the current tax system needs to be overhauled, we do not believe it should be done as part of a budget balancing endeavor. Such a top-to-bottom review should be undertaken by a special commission with the active involvement of the governor's office and the General Assembly.
But as we acknowledged at the beginning of this editorial, Ohio's fiscal crisis is real, which means action must be taken quickly to not only erase the $720 million shortfall in the current budget, but eliminate the red ink that is anticipated in the next two-year budget.
We believe that a proposal put forth by several Republican legislators for a temporary 1 percent increase in the sales tax is the way to go. The increase would generate $1.2 billion a year and would be in effect until Ohio's finances stabilize.
The temporary nature of tax is what is most appealing to us. By contrast, the tax plan that Taft is proposing would end up being permanent, which is problematic. Indeed, the current sales tax, which was enacted almost 70 years ago, was supposed to be temporary.
Sen. Kevin Coughlin, a Republican from Cuyahoga Falls, says a broad-based tax increase is better than "nickel-and-diming every service industry out there." And the temporary status would make it palatable to a larger number of legislators.
Why would we support a tax increase when the Democratic minority in the Legislature and some Republicans insist that current government spending can be slashed? Because we do not believe that enough money would generated even if funding for all nonmandated services were eliminated.
We caution members of the Mahoning Valley's legislative delegation -- it is predominantly Democratic -- not to jump on the cut-government-spending bandwagon without considering the ramifications for the region.
A reduction in state government outlay hits the Valley harder than other region of the state. That's because our needs are greater and our economy is much more fragile.
It should be remembered that in last year's budget balancing exercise, there was an across-the-board reduction in spending, which prompted Taft to warn that the budget had been cut to the bone. He contended that further reductions could cripple the state's ability to provide essential services.
That is why we aren't willing to join the cut-government-spending chorus. There are just too many programs locally that depend on money from Columbus. For instance, without additional revenue, the state would be hard-pressed to keep its commitment to the Valley to provide economic incentives to attract high-paying jobs.
Taft and his predecessor, George V. Voinovich, developed an economic incentive package for General Motors Corp. that went a long way toward persuading the world's leading automobile manufacturer to select its Lordstown assembly plant for the home of the new compact cars that will be built next year. That's state money.
The state cannot balance its general fund budget merely by cutting spending. As the governor has noted, without additional revenue the ax will fall heavily on higher education, and one of the main casualties will be Youngstown State University.
We are confident that cooler heads will prevail and that there will be additional revenue generated, along with some cuts in spending. The 1 percent temporary sales tax, which can be imposed by the legislators themselves, offers a quick, fair solution.