On June 30, Ohio Governor John Kaisch signed into law a $56 billion, two-year budget that includes painful cuts to many public services including education. That didn’t stop the governor and legislators from finding room to give tax breaks to the wealthy.
Ohio’s biggest revenue drop and boon for the state’s wealthiest taxpayers will come from the repeal of the state’s estate tax. Ohio law held that estates worth more than $338,333 would be taxed before it was distributed to heirs or beneficiaries. That’s less than 10 percent of all decedents’ estates in the state. Unfortunately, the loss of this highly progressive tax in Ohio will probably be made up through increases in regressive local taxes. A recent CTJ article highlighted the need for an estate tax. Eighty percent of the tax revenue from estates goes to local governments, which amounted to $230.8 million in FY 2011. Coupled with other cuts in public services including education, local governments will really be feeling the pain this fiscal year.
A last minute addition to the budget is a new tax break for investors of Ohio small businesses worth up to $100 million a year, dubbed “InvestOhio.” While supporters of the law claim it will spur job creation, there a few important details that suggest Ohio may just be wasting badly needed revenue. Qualified investors will receive a tax credit, but nothing in the law requires that investment to contribute to job creation. Furthermore, the law may be subsidizing investing activity that would’ve happened anyway. State Representative Mike Foley put it succinctly: “It’s basically just a giveaway to rich people.”
Perhaps the most telling part of the budget is what was left out. A common-sense law that would have required a review of Ohio tax expenditures (deductions, credits, and exemptions) worth $7 billion a year was removed from the final budget. This sunshine provision would have allowed lawmakers to openly review and report on the success (or lack thereof) of tax policies annually. By stripping the review law, the conference committee undermined the legislature’s authority, and demonstrated to Ohioans that accountability and transparency are too easily sacrificed in favor of narrow special interest groups.