Ohio Supreme Court Weighs in on Two Key Revenue Issues

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Monday, the Ohio Supreme Court sided with a group that wants to put Governor Ted Strickland's proposal to install 17,500 slot machines at seven area horse tracks to a vote of the people in November 2010. This can't be welcome news to the Governor or his supporters who wanted to quickly implement the plan without such a vote and raise an estimated $933 million to balance the state's budget.

Despite the ruling, the Governor could order that the slot machines be placed anyway, but the political ramifications of moving before the vote could be unpredictable. The Akron Beacon Journal recently opined that the Court's ruling gives the Governor a second chance, and that "the opportunity the court has presented involves heading in a new direction, addressing the deficit in a simple and responsible way." 

There certainly are more responsible and progressive ways to address the deficit than relying on slots, a point that Policy Matters Ohio has been making for several years. For more dtails, see their timely report, A Step Toward Fiscal Balance: Options for Ohio's Income Tax.

In brighter news for Ohio's budget, the Ohio Supreme Court ruled last week that grocery stores were indeed responsible for paying the state's Commercial Activity Tax (CAT) despite language in the state's constitution which forbids taxing food.

The CAT functions like a gross receipts tax. The Ohio Grocers Association challenged the tax's constitutionality, arguing that the tax is, in fact, a tax on food because it is calculated from the gross receipts of grocery stores. But Justice Maureen O'Connor disagreed. She wrote in the majority opinion, "When the CAT's practical operation is considered, it becomes evident that it is what it purports to be: a permissible tax on the privilege of doing business, not a proscribed tax upon the sale or purchase of food."

The Court's ruling means that the cash-strapped state can keep $350 million in CAT revenue it has already collected from grocers and can expect another $370 million over the next two years.

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