Taft renews tax overhaul drive

6/12/2003

COLUMBUS - Gov. Bob Taft's answer for patching a projected two-year budget hole that widened yesterday to $1.1 billion relies heavily on collecting more taxes.

His budget director, Tom Johnson, didn't push reductions in proposed spending before a joint House-Senate conference committee.

Instead, he continued to support the governor's two-year spending request of $49.2 billion.

Mr. Taft's administration renewed its call for an overhaul of Ohio's sales, personal income, and corporate tax system, arguing that a “temporary” penny increase in the state sales tax over the next two years only delays the inevitable.

“The penny, once it expires at the end of the next biennium, will leave a hole of approximately $2.5 billion for the next budget,” said Tax Commissioner Tom Zaino. “Without any significant tax revenue increase along with significant economic growth, which I'm not predicting, we'll go into the next biennium [2006-2007] with a major problem.”

The new 6 percent state sales tax - 7 percent on average once local add-ons are factored in - would rival only Pennsylvania for the highest sales tax in the region.

State Rep. Jim Hoops (R., Napoleon), one of six budget conferees, said he doesn't believe a $49.2 billion spending plan, let alone the Senate's $49.3 billion version, could pass the House.

The House passed a $48.7 billion plan criticized by the governor for spending levels on basic and higher education well below what he proposed.

Senate President Doug White (R., Manchester) said the goal is to send a final budget to Mr. Taft by the end of next week.

While eager to preserve what few tax reforms the House and Senate have embraced, Mr. Zaino voiced concern about the General Assembly's decision to subject satellite television to the sales tax without including rival cable TV.

The satellite industry is threatening to challenge the constitutionality of such a move.

The cable industry argues it should be exempted from the state tax since it is subjected to a local franchise fee that satellite is not.

The administration has lowered its revenue projections in nearly every tax category except auto sales and cigarettes.

Overall revenue, particularly personal income and sales taxes, is projected to fall $966.5 million below forecasts presented to the General Assembly several months ago.

The hole widens to $1.1 billion once other factors are considered: Lowered expectations for how much a penny hike in the sales tax would raise; increased Medicaid expenses, and fewer anticipated savings from freezing an income-tax-tied fund supporting local governments and libraries.