Sales tax expiration spurs debate

1/27/2005

COLUMBUS - As Gov. Bob Taft prepares to push for a cigarette tax hike, Republican legislative leaders are struggling with what to do with the 2003 temporary 1 percent sales tax increase set to expire on June 30.

Instead of letting the tax increase expire, some GOP senators have discussed keeping the state's rate at 6 percent for two more years or reducing it to 5.5 percent and using 0.5 percent of that revenue to offset a cut in the personal income tax rate.

But House Speaker Jon Husted (R., Kettering) said a final decision has not been made. "We're considering all options as part of tax reform," he said.

Two years ago, the legislature increased the sales tax rate from 5 percent to 6 percent, but referred to it as "temporary."

The state faces a projected shortfall that could reach $5 billion in the two-year state operating budget from July 1 to June 30, 2007.

Mr. Husted spoke as business groups said that Mr. Taft, as part of his Feb. 8 State of the State address, may propose raising the cigarette tax from 55 cents to $1 a pack.

The proposal would be one element of a tax package that could include using a gross receipts tax, which would generate tax dollars based on business sales, to eliminate the corporate franchise and tangible personal property taxes.

In 2002, Ohio raised its cigarette tax from 24 cents a pack to 55 cents.

Yesterday, the House of Representatives voted 90-2 to approve the two-year, $1.5 billion bricks-and-mortar budget. The dissenters were two conservative Republicans: Tom Brinkman of Cincinnati and Ron Hood of Ashville.

The vote came after a brief but pointed debate over whether legislators have complied with Supreme Court decisions dating to 1997 that struck down the state's school-funding system as unconstitutional.

State Rep. Charles Calvert (R., Medina) noted that the capital budget bill includes $544.6 million for school construction and repairs. But state Rep. Dale Miller (D., Cleveland) said local property taxes still pay for about half of the operating funds for public schools.

The GOP-controlled House tabled four Democratic amendments, including one to transfer $50 million to help local governments pay for streets damaged by winter storms.

Also, the House tabled an amendment from Mr. Brinkman to repeal the prevailing wage requirement on government-funded projects. Mr. Brinkman's plan, which he said would have saved tax dollars, would have exempted only transportation projects.

A tabling motion avoids a "yes-or-no" vote on the amendment's merits.

The capital budget bill includes $3.5 million for the proposed riverfront development project in East Toledo, $1.9 million to help COSI Toledo begin renovating its "Learning World" exhibits, and $42.3 million for projects at the University of Toledo, Bowling Green State University, Medical College of Ohio, and Owens Community College.

The measure also has a provision to rename Medical College of Ohio the Medical University of Ohio at Toledo. State Rep. Peter Ujvagi (D., Toledo) worked to get the name change into the bill.

"MCO is the last of the universities without 'university' in its name," he said.

Mr. Ujvagi cited a July, 1967, MCO Board of Trustees meeting chaired by the late Paul Block, Jr., former publisher of The Blade, in which the trustees stated the institution should incorporate university into its name "when other colleges may be added to the total structure."

MCO now has four schools: medicine, nursing, allied health, and graduate studies.

The Senate plans to approve the capital budget bill next week and send it to Mr. Taft for his signature.

Contact James Drew at: jdrew@theblade.com

or 614-221-0496.