Kasich’s budget proposal includes changes to income and sales taxes

By David Skolnick


Gov. John Kasich recommends reductions to the state’s income tax, increased taxes on fracking and Medicaid coverage to an additional 275,000 people in his proposed $63.3 billion, two-year budget proposal.

Kasich, a Republican, unveiled his proposal Monday that also returns a small portion of the 50-percent cut to local governments.

The state will have a surplus of as much as $1.9 billion this year, Kasich said.

Here are 10 key issues from Kasich’s proposal.

The state sales tax would drop from 5.5 percent to 5 percent, saving taxpayers about $2.4 billion annually. But the proposal also calls for extending the tax to services such as lawyers, architects, accountants and lobbyists, bringing back $1.3 billion to the state in the budget’s first fiscal year, starting July 1, and then $1.8 billion the following fiscal year.

Because of that tax expansion, the proposal includes a temporary rollback in local sales-tax rates of 10 percent to 30 percent. The proposal “guarantees” at least 10-percent growth for counties and transportation entities that have sales tax this year compared to 2012, and then at least another 10-percent increase in revenue for 2014 compared with this year.

Beginning in July, local government wouldn’t be permitted to change their sales tax for three years.

Also, the Local Government Fund, which was cut by 50 percent in Kasich’s last two-year budget will see a slight increase, 7.6 percent over the next two years.

“I don’t see how you can cut taxes and not give local governments enough money for essential services like police and fire,” said Carol Rimedio-Righetti, chairwoman of the Mahoning County Board of Commissioners and a Democrat. “He’s hurt local governments and forced them to raise money [through tax levies] to operate.”

Reduce income-tax rate by 20 percent for individuals over three years, a $2.1 billion cut, and by 50 percent to businesses that make $750,000 or less over two years, a $600 million to $650 million reduction. If approved, this would start taking effect in July.

When Kasich ran for governor in 2010, he mocked a 21-percent income-tax-rate decline over five years — it ended up being six years as it was deferred for a year at the request of then-Gov. Ted Strickland, a Democrat, because of the state’s struggling economy.

The 21-percent income-tax reduction “didn’t work to bring in businesses and jobs to the state,” said state Rep. Robert F. Hagan of Youngstown, D-58th. “What makes anyone believe it will work this time? [Kasich] is playing games with these numbers. There’s a myriad of issues of concern. Reducing the income tax again isn’t one of them.”

Part of the income-tax cut would come from a severance tax on fracking.

Instead of the current fee of 20 cents per barrel of oil, big-oil frackers would pay a 1.5 percent tax during the first year of this budget and then 4 percent annually thereafter. Also, there would be a 1 percent tax on natural-gas drilling wells.

Kasich said the current fee is among the lowest in the nation. This tax would bring in about $155 million annu-ally to the state with the expectation it would grow to about $415 million a year in the near future.

Conventional gas wells, which make up about 90 percent of the wells in Ohio, wouldn’t be taxed.

The Ohio Petroleum Council, an oil and natural-gas industry organization, criticized the tax proposal saying it would slow devel- opment and cost high- paying jobs.

“This proposal is ill-conceived and ill-timed,” said Robert Eshenbaugh, the council’s legislative analyst.

Hagan called the initial 1.5 percent tax “embarrassingly low.”

“It’s a scheme to have drillers get as much as they can out of the ground during that first year,” Hagan said. “After they get everything out of it, there’s a little tax increase after that. But most of the drilling is done by then.”

Provide $2 billion in the upcoming fiscal year, which starts July 1, and $2.1 billion, for the next fiscal year, to local government to offset revenue losses because of the 2.5 percent homestead exemption.

Increase spending by $31.9 billion over the next two fiscal years to add about 275,000 Ohioans to the state’s Medicaid program. Families making up to 138 percent of the federal poverty line, about $15,400 annually a person, would be eligible for the program that provides medical treatment and health care.

The federal government would pay 64 percent of the cost.

Democrats praised Kasich for his decision.

“We have to give the governor credit for supporting the Medicaid expansion,” Hagan said.

U.S. Sen. Sherrod Brown, a Democrat from Avon, said Kasich’s “announcement is good news for health-care consumers, taxpayers and businesses in Ohio.”

Increase funding for primary and secondary education.

Kasich proposed this last week. The state would provide $7.3 billion for educa- tion in the fiscal year, starting in July. That’s a 5.7 percent increase over this fiscal year, and increase it to $7.5 billion the following fiscal year. No data on local funding amounts has been released.

Increase higher education spending by $2.3 billion in the next fiscal year, 0.6 of a percent increase over the current fiscal year, and then to $2.4 billion the following fiscal year.

Increase non-Medicaid health and human services spending to $1.2 billion annually in the two upcoming fiscal years. That’s 0.2 percent more than is spent this fiscal year.

Increase justice and public protection annual funding to $1.8 billion in the next two fiscal years. That’s a 1.6 percent increase from this fiscal year. This is primarily for the Departments of Rehabilitation and Correction, and Youth Services.

Spend $517.5 million in the upcoming fiscal year for environment, development and transportation, primarily for the Departments of Development Services and Natural Resources. That’s a 7.9 percent increase from this fiscal year. The amount would grow to $544 million in the fiscal year starting July 1, 2014.

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