Invest in Ohio’s future, not tax cuts

2/17/2013

By GAVIN DeVORE LEONARD

The new state budget proposed by Gov. John Kasich takes some important steps. Expanding Ohio’s Medicaid program will provide health insurance to hundreds of thousands of working-poor Ohioans, while also creating jobs.

But the governor’s plan leaves much to be desired in even beginning to restore the billions of dollars of cuts in the current budget to essential services that Ohioans rely upon.

The share of state taxes paid by businesses and wealthy residents has gone down. Everybody wants lower taxes, but everybody also wants great schools, roads, and public services.

The state needs revenue to pay for the services that make our communities stronger. Who pays how much?

In 2005, a tax overhaul ended Ohio’s corporate income tax and reduced personal income taxes by 21 percent. The idea was, and still is, that lower taxes would bring jobs and growth.

But these things haven’t materialized. Ohio has fewer jobs today than we did in 2005. Meanwhile, the state has lost $2.5 billion a year in revenue. Public schools, local governments, and other social services have suffered billions in cuts.

Most Ohioans got little benefit from the tax overhaul. Middle-income Ohioans receive, on average, a refund of $182 a year. The income tax cuts most benefit the wealthy — Ohio’s top 1 percent typically get $10,000 a year in state tax relief — while services that low-wage earners especially rely on get cut.

Governor Kasich’s budget would drain another $2 billion a year of income tax revenue; most of it would go to affluent Ohioans. Additionally, a poorly targeted new tax break would lower taxes for owners of big businesses, along with the small businesses the proposal aims at.

More positively, the budget sensibly increases the tax on oil and gas drilling. The higher revenue could allow us to invest in great public services, especially in local communities.

Mr. Kasich’s plan would substantially increase the state’s sales tax base — and revenues — by taxing services that range from legal representation to laundromats. In return, the sales tax rate would drop from 5.5 percent to 5 percent. It’s appropriate to draw revenue from many services that have used loopholes to avoid taxes for far too long.

But the devil will be in the details. The sales tax changes would handcuff counties: A complicated new mechanism would prevent them from levying new sales taxes for nearly three years for things they feel are important, such as expanding public services for disabled residents.

The relationship between the state and local governments would change. And the state certainly wouldn’t lose out.

The governor’s budget also includes shortsighted moves such as borrowing against Ohio Turnpike revenues. That would spend future turnpike tolls and leave the debt to our children to repay.

Mr. Kasich’s proposal has questionable investment priorities. Ohio has an improving economy and rising revenues. But after billions in cuts in the mid-recession budget, the new budget makes no serious attempt to make up for lost ground.

We should give local governments that fix our roads and keep our communities safe the tools and resources they need. We should increase support for vital programs that help our seniors.

By investing in our people and priorities such as public schools, we can create good jobs now that will help grow Ohio’s future. Mr. Kasich’s budget offers little new money for any of these priorities — the ones middle-class Ohioans are most concerned with.

State lawmakers now must study the governor’s proposal, listen to their constituents, and work toward the common good. Instead of doubling down on tax cuts that haven’t worked, let’s focus on what affects most Ohioans, such as halting the escalation in college tuition costs.

Our economy is moving in the right direction. The next two-year budget is an opportunity to invest in Ohio’s future.

Gavin DeVore Leonard is state director of One Ohio Now, a Columbus-based coalition of more than 80 health and human-service organizations, labor unions, and advocacy groups.