COLUMBUS - The tax burden on the poor and middle-class would increase more than the wealthy and many businesses would get tax breaks in the budget bill that the Ohio Senate approved, opponents said yesterday.
A two-year increase in the state sales tax rate from 5 per cent to 6 per cent would generate $2.5 billion more for the state. Consumers would pay 70 percent of the total, with businesses picking up the rest, according to the state Department of Taxation.
Adding in the recent gasoline tax hike and proposed fee increases, a family of four earning $41,000 a year would pay $421 more in state taxes next year, said state Sen. Jim Jordan (R., Urbana), among six Republicans who voted against the budget.
“For working families in places like Youngstown and Lima, that's one week's paycheck,” he said.
The sales tax rate increase would be close to five times as great a burden to low-income taxpayers as it would be to the most affluent, said Zach Schiller, research director for Policy Matters, a Cleveland research group. Ohioans making $15,000 to $65,000 a year will pay at least three times as much of their earnings as the richest Ohioans, he said.
Tangible personal property tax breaks for businesses would total an estimated $3 billion by the end of this decade, said state Sen. Leigh Herington (D., Ravenna).
As in the budget bill that the House of Representatives adopted in April, the Senate added eight services -including satellite TV, dry cleaning, and self-storage - to the sales tax base, but not the dozens that Gov. Bob Taft wanted.
The GOP-controlled House and Senate also rejected Mr. Taft's call for major changes to the corporate franchise tax that would have boosted the tax bills of the biggest companies in Ohio.
The Senate version of the budget bill increases the minimum corporate franchise tax from $50 to $1,000 for corporations with gross receipts of more than $5 million annually or those having more than 300 employees.
But that change is expected to generate only $2.3 million, Mr. Herington said.
The Senate should have embraced Mr. Taft's proposal to stop large corporations from shifting money earned in Ohio out of state, said David Ellis, a fellow with the Federation for Community Planning in Cleveland.
Mr. Taft also wanted Ohio to start taxing the sales of a corporation in Ohio to a state without an income tax or where that corporation does not have a presence.
“The people who should be paying their fair share are not paying their fair share,” said Mr. Herington. “Even the governor risked his future to tell us what we should do.”
But Dan Navin, a lobbyist with the Ohio Chamber of Commerce, said it's misleading for critics to focus solely on the corporate franchise tax - given that businesses in 2000 paid $10.6 billion in state and local taxes.
“Ohio businesses pay many more taxes than the corporate franchise tax. They pay the personal income tax. They pay state and local sales tax. They pay personal property tax. They pay real property tax. They pay municipal income tax,” he said.
The Senate budget bill includes provisions that “provide economic opportunity for Ohio businesses,” said state Sen. Bill Harris (R., Ashland), chairman of the Senate Finance Committee.
The bill would accelerate the phase out of the inventory portion of the tangible property tax, and allow companies to take a higher depreciation amount on machinery and equipment over 10 years, said Sen. Ron Amstutz (R., Wooster).
“It will provide Ohio with a competitive advantage,” said Mr. Navin, the Ohio Chamber of Commerce lobbyist. “This recession has been characterized by a lack of business investment. It's not like consumers haven't been spending.”
In addition, thousands of businesses that don't owe tangible personal property taxes because the value of that property is under $10,000 won't have to file annual forms.
The Senate budget plan also places an $800 cap on the taxes that the state could collect from individuals and businesses that buy time on private jets, referred to as “fractional ownerships.”
“The corporations and the millionaires get their jets almost tax-free to fly over the rest of us,” said state Sen. Robert Hagan (D., Youngstown).