Strickland will seek repeal of income tax cut

10/1/2009

COLUMBUS - Gov. Ted Strickland announced yesterday that he wants to repeal the final year of an income tax cut to shore up the state's sagging budget - a move that would snatch $844 million from taxpayers' pockets over the next two years.

The Democratic governor called the move a freeze, arguing that suspending the fifth and final year of a 4.2 percent income tax cut, which took effect in January, was not a tax hike because taxpayers would pay the same rate as 2008.

"There would be no increase in individual or business tax unless that individual or business had earned more money than in '08," he said. "The rate would remain the same.'

But a family of four earning $60,000 would pay $78 more in state income taxes than they would have otherwise without Mr. Strickland's proposed move, according to state tax officials. Most taxpayers would see the size of their refunds shrink.

The governor's proposal would have to be approved by legislators.

House Republicans labeled the proposal an unacceptable tax hike. State Sen. Tim Grendell of Chesterland called the move a "flip-flop" and said Mr. Strickland's rationale for labeling it a freeze was ridiculous.

Somewhat lost in the tax hike hubbub was the reason for Mr. Strickland's decision - a 6-1 Ohio Supreme Court decision last week that threw open the door for a ballot challenge to the governor's plan to add up to 17,500 slot machines at the state's seven horse-racing tracks. That blew a hole in the state's education budget, which had been counting on $851 million in slot machine revenue.

Mr. Strickland said he is abandoning his plan to put the slot machines at the race tracks for the rest of the two-year budget cycle, which ends in mid-2011, although he wants to preserve the option of adding slots later.

Mr. Strickland's call for repealing the tax cut was neither rejected nor accepted by Senate President Bill Harris (R., Ashland). Mr. Harris said he was committed only to keeping all of his options open to solve the state's budget crisis.

Mr. Harris' position is key because for the governor's plan to pass the Republican-dominated Senate, five Republicans would have to join all 12 Democrats in voting for the measure.

Mr. Strickland said the Supreme Court's decision left him with three choices: Cut education funding by $851 million, pass a temporary sales tax hike, or forgo the final year of the state income tax cut. The governor said cutting education would devastate public schools and a sales tax increase could hurt Ohio's economic recovery efforts.

"We can protect our schools from destructive cuts while avoiding a sales tax on Ohio families and businesses during a recession," he said.

Mr. Strickland also said trying to cut $851 million from other areas and then shifting the money to education funding wasn't something he was willing to contemplate.

"We have a very lean budget and I believe it would be absolutely intolerable for us to cut further," he said.

Reaction from House Speaker Armond Budish (D., Beachwood) was also noncommittal. He indicated he would discuss the proposal with his colleagues "to find common ground and chart a course that protects education funding."

Democrats hold 53 seats in the 100-seat House chamber.