Delay in Ohio tax cut could result in flip-flop charge

10/2/2009

COLUMBUS - Many taxpayers barely noticed when their weekly paychecks rose slightly this year thanks to an income-tax cut that Gov. Ted Strickland now proposes to interrupt in mid-stream.

Are they more likely to take notice if the state takes that money back in one lump sum via smaller refunds next spring?

"There's no doubt some people will have a reaction," said John Green, director of the University of Akron's Ray C. Bliss Institute of Applied Politics. "Others might not notice it. People are more likely to notice increases in sales and property taxes. With the sales tax, you see it every time you buy something. With the property tax, you see it every time you get an assessment."

Opening himself up to more allegations of flip-flopping after previously opposing such suggestions, the Democratic governor has proposed delaying the fifth and last increment of what was designed to be a 21 percent tax cut once fully implemented.

His change of heart came after the Ohio Supreme Court last week poked a massive hole in the state education budget, ruling that the governor and lawmakers could not bypass a vote of the people on their way to introducing slot machines at racetracks.

Any change in tax rates would need legislative approval. The Strickland administration projects the state would keep about $844 million over two years by postponing the final installment of the tax cut for two years. The slots proposal was expected to raise about $933 million over that time period.

The Ohio Chamber of Commerce yesterday said a delay of the final tax cut increment of 4.2 percent may be the "least onerous" option on the table. President Andrew E. Doehrel said the chamber "urges the governor and legislative leaders to adopt a mechanism that automatically restores the tax cut when specific criteria are met."

Sen. Mark Wagoner (R., Ottawa Hills), who chaired a budget committee that questioned the slots proposal, stopped short of declaring Mr. Strickland's proposal dead on arrival in the Senate. But he said the Republican-controlled chamber would prefer to address the budget hole without a tax increase.

"If [the governor] would have listened to us in July and put this before the voters to solve the constitutional concerns - and all of the polling has indicated it would have most likely have passed - this whole fiasco could have been avoided," he said.

Rep. Matt Szollosi (D., Oregon), the second-highest ranking member of the Democratic-controlled House, said the General Assembly can't afford to do nothing. Toledo Public Schools stands to lose about $50 million over two years if the budget hole remains unfilled.

"That's not an option," he said. "Our intention is to work with the Senate in a bipartisan fashion to come up with the least damaging solution to the problem."

Mr. Strickland has characterized the proposal as a tax freeze as opposed to a tax hike.

"The income tax rate would be exactly the same rate as last year," said Strickland spokesman Amanda Wurst. "If a family's earnings are the same as in 2008, because of a slight increase in the personal exemption, that family would still likely pay fewer taxes this year than last."

Through lowered withholding rates, taxpayers have benefited for the last nine months from the last of five annual income tax reductions. For a typical family of four with two wage-earners grossing $60,000 a year and filing jointly, this year's reduced withholding translates into about $1.63 more in weekly take-home pay, about $85 a year.

If the Democratic-controlled House and Republican-controlled Senate agree with Mr. Strickland's proposal, that family would see their refunds during next spring's tax filing season decreased by roughly the same amount. The amount could be slightly less than last year, however, because the inflation-adjusted personal tax exemption will rise from $1,500 in 2008 to $1,550 in 2009.

Contact Jim Provance at:

jprovance@theblade.com,

or 614-221-0496.