Budget battles over tax reform

Eight House Republicans opposed the budget.
COLUMBUS -- Most Republicans hailed the state's new two-year, $51.2 billion state budget as a transformation of an archaic tax structure to make it more in line with the times.
Most Democrats, meanwhile, lambasted the spending plan as favoring the wealthy at the expense of the middle class and the poor.
But in the end, the House voted 53-46 and the Senate voted 19-13 Tuesday to forward the state budget that takes effect July 1 to Republican Gov. Bob Taft with most of the governor's tax-reform plan in place.
Eight Republicans joined 38 Democrats to oppose the measure in the House, while one Democrat -- Dixie Allen of Dayton -- sided with Republicans to approve the bill.
In the Senate, two Republicans -- Jim Jordan of Urbana and Lynn R. Wachtmann of Napoleon -- joined all 11 Democrats to vote no.
In the House, Speaker Pro Tem Charles Blasdel, R-East Liverpool, called the tax changes in the bill "monumental" and said state officials have held spending increases to 4 percent over the two-year budget period that ends June 30, 2007.
"We've held the line on spending to less than the rate of inflation," Blasdel said.
Meanwhile, in the Senate, at least one critic said the proposed increase of higher education appropriations by $30 million over the nearly two-year budget period isn't nearly enough.
"It's not going to impact the education of young people in this state," warned state Sen. Eric D. Fingerhut, D-Cleveland.
Governor's provisions
The state spending plan keeps many of the provisions pushed by Taft to rewrite Ohio's tax laws including the following:
UA 21 percent across-the-board cut in state personal income tax rates over five years.
UA phase-out of the corporate franchise tax to be replaced with a controversial new "commercial activity tax" on business receipts.
UA phase-out of tangible personal property taxes on business machinery, inventory, equipment, furniture and fixtures.
UMaking permanent half of the temporary 1-percent sales tax increase set to expire June 30.
Tax increases
The GOP-dominated Legislature departed from the governor's originally proposed 45-cent cigarette tax increase and originally proposed 30 percent increase in some electricity-consumption related taxes by boosting the cigarette tax by 70 cents per pack as well as eliminating the electricity-consumption related tax increase.
In a prepared statement, Taft said he was pleased that most of his tax-reform proposal survived intact.
"With this historic budget, the General Assembly acted to hold the line on spending and help create jobs in the state, and I look forward to signing this bill," Taft said.
The budget proposal hammered out by a joint panel of House and Senate lawmakers over the weekend from versions approved by both chambers would keep state and local government funding frozen at current levels -- about $1.2 billion annually.
The governor's proposed spending plan as well as versions passed by both the House and the Senate would have had reductions in state aid to cities, counties and other local governments.
"We're certainly pleased," said John R. Leutz, a senior policy analyst with the County Commissioners Association of Ohio.
& quot;We're primarily agents of the state," Leutz said. "They [state officials] have county governments implementing and carrying out a lot of the policies they create. Essentially it [the originally proposed cuts] would have amounted to an unfunded mandate."
In human services, the state budget adopted by the Legislature approved $60 million over the two-year budget period for the Disability Medical Assistance Program, which had been proposed to be eliminated under a previous plan. DMA pays for treatment and prescription drugs for the very poor with severe physical and mental impairments.
In education, the budget adopted by lawmakers would allow school districts to ask voters to approve levies that can grow as much as 4 percent a year and would create a new schools voucher program to allow as many as 14,000 students in failing schools to attend private schools.
Also, the budget would form a panel to begin studying whether employees of public schools should be required to join a statewide health-insurance pool.
Budget critics said the budget would force more responsibilities onto the backs of residents through various fee increases as well as in other ways.
"This budget overwhelmingly puts all of the responsibilities for everything back on the taxpayer," said state Rep. Kenneth A. Carano, D-Austintown.
Carano cited budget provisions that would allow school levies that grow with inflation as well as making permanent half of the 1 percent temporary sales tax hike.
State Rep. Stephen P. Buehrer, R-Delta, who voted against the budget, said he also opposed the spending plan, in part, because of the permanent sales tax increase.
"At the end of the day, this budget is still a tax increase on Ohio," Buehrer said.
But supporters of the budget said the plan will improve the business climate in the state and hopefully spur the economy.
"We're trying to shift away from taxing business investment up front, trying to encourage business investment in Ohio," said state Sen. Ron Amstutz, R-Wooster.
The current two-year, $48 billion state budget runs through June 30.

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