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Published: Sunday, 8/25/2013 - Updated: 1 year ago

0.25% INCREASE

Sales tax set to rise statewide

Change taking many by surprise

BY JIM PROVANCE
BLADE COLUMBUS BUREAU CHIEF

COLUMBUS — No customers walking in the doors at Mathews Ford in Oregon have mentioned the fact that the tax on the cars they’re thinking about buying is about to go up.

“I just found out today,” salesman Justin Canfield said last week. “It’ll be a great tool [to close a sale] now that I know about it.”

A $30,000 car purchased today in Lucas County will cost the buyer $2,025 in sales taxes. If the buyer mulls it over one week and signs the papers on or after Sept. 1, the sales tax bill will climb to $2,100 thanks to the two-year state budget that went into effect on July 1.

“Some of my sales people have had a couple [customers] mention it,” said Greg Oehlers, sales manager at Dave White Chevrolet in Toledo. “Of course, I would mention that to people. But is it a driving concern? I would say no. If it were going up half a percent or three-quarters of a percent, that would have a huge impact.”

The new $62 billion, two-year state budget juggles a variety of tax changes, moving slightly away from taxing income toward taxing consumption.

The budget provides a 10 percent income tax cut for taxpayers phased in over three years, starting at 8.5 percent this year. It cuts income taxes on the first $250,000 earned by small businesses by 50 percent.

But the income tax cut is partially offset by a quarter-of-a-cent hike in the state sales tax to 5.75 cents on the dollar. With the local piggyback tax, the rate will be 7 cents in Lucas County. The sales tax base also will be expanded to include magazine subscriptions and digital downloads, such as e-books and music, for the first time.

In fiscal 2013, which ended on June 30, overall sales tax collections for Ohio were $8.4 billion, up a healthy 4.4 percent over 2012.

Even with the Sept. 1 increase, Ohio’s base sales tax rate of 5.75 cents on the dollar is lower than all of its neighbors. Indiana is at 7 cents while Michigan, Pennsylvania, Kentucky, and West Virginia are all at 6 percent.

But some states, such as Michigan, have no local piggyback tax, while the highest rate in Ohio will be 8 cents on the dollar in Cuyahoga County. No Ohio county will have a rate lower than 6.5 cents after Sept. 1, and none in northwest Ohio will be below 6.75 cents.

Greg Lawson, Statehouse policy analyst with the conservative Buckeye Institute for Public Policy Solutions, said the increase is unlikely to have much of an impact on Ohio business.

“The worst thing we might see is a situation where people cross borders and do slightly better, if they don’t have to go too far,” he said. “When you factor in the piggyback tax, our rate is higher.”

He said his organization would have preferred more of a “pop” on the income tax cut side to justify the sales tax increase.

“In the grand scheme of things, base expansion is probably the direction we eventually have to go,” he said.

Lynn Magdich, design sales manager at Semsen Furniture based in Genoa, said a few customers have mentioned the pending increase. “But nobody is hinging a decision on it,” she said. “I don’t think the purchases pending are enough that a quarter of a percent is going to make a significant difference.”

Still Ms. Magdich said sales people will mention the pending tax increase if it’ll help make the sale now. She said the business was already planning a Labor Day sale in which it would basically pay the sales tax on purchases.

The higher rate was part of a compromise among Gov. John Kasich and fellow Republicans controlling the General Assembly. Lawmakers balked at the governor’s idea of greatly expanding the sales tax base to include a litany of services not previously taxed.

It was part of his much broader reform proposal that, in addition to lowering income taxes, would have reduced the base sales tax rate to an even nickel on the dollar.

“I’m not sure that most people will be aware of the [increase],” said Zach Schiller, research director of the left-leaning Policy Matters Ohio. “It’s not like it’s going up a penny. But it is an increase, and it does fall more heavily on lower-income people.”

Like the Buckeye Institute, Policy Matters would have preferred a broader tax base to a higher tax rate.

“We’re increasing the rate on an ever-shrinking part of the economy, and Governor Kasich recognized that,” Mr. Schiller said.

Dan Navin, assistant vice president of tax and economic policy for the Ohio Chamber of Commerce, said the organization has not received much feedback either way.

“That’s primarily because it’s a relatively small increase,” he said.

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.



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