The Cleveland Plain Dealer has a new series on Ohio Gov. John Kasich’s ambitions to eliminate the state’s income tax, and the findings aren’t great for tax cut supporters.
The paper notes that eliminating the state’s second largest source of revenue could affect services, like education, and prompt local governments to raise taxes to offset the loss in money from the state; Ohio’s budget director “estimates that 85 percent of the state budget goes to education, local governments and counties.”
Kasich and his supporters (usual suspects The Heritage Foundation and Art Laffer) argue that eliminating the income tax will improve the business climate in the state and bring in new residents. Kasich, however, is careful to contend that the benefits won’t come overnight: “It’s like putting seeds in the ground. You don’t get the harvest until later.” That’s because far from attracting businesses and new residents, as supporters dubiously claim, eliminating the income tax will just bankrupt Ohio. One need look no further than Kansas, where Sam Brownback’s ALEC-tested, Laffer-approved tax breaks have the state staring down gargantuan budget deficits.
Ironically, eliminating the income tax would force Ohio to rely on taxes that hinder business (like the severance tax) and unfairly burden working Ohio families (like the sales tax). A report by Policy Matters Ohio, using data provided by ITEP, found that the state would have to almost double its sales tax to pay for income tax elimination, leaving Ohio’s middle class with a tax increase rather than a cut.
Meanwhile, the biggest benefits would go to the state’s top 1 percent, who would save “more than $31,000 a year in taxes.” In the words of our own Matt Gardner: “When people talk about repealing the income tax in Ohio and other states, they generally don’t like to talk about these things.” Any wonder why?