Conservative leaders in the Ohio legislature reached an accord on the state budget, ultimately agreeing to a net tax cut of $1.85 billion over two years. The move is sure to make the revenue outlook worse in Ohio and will undermine investments in priority areas like education, infrastructure and healthcare.
For months, lawmakers battled over a trifecta of budget proposals. Gov. John Kasich proposed across-the-board income tax cuts for the third time in his tenure, but offset some of the regressivity in his plan by suggesting that deductions and credits for senior citizens be means-tested. Kasich also wanted to increase sales, business and cigarette taxes, as well as implement a new severance tax on oil and gas extraction. Even so, the governor’s plan would have been a huge tax shift from the rich down the income scale. A proposal by House leaders adopted some of Kasich’s tax cuts and means-testing, but none of his other planned increases. Senate leaders added to the tax cuts approved by the House, while adding an increase in the cigarette tax.
The deal reached by legislative leaders includes a 6.3 percent across-the-board income tax cut – smaller than that sought by Gov. Kasich. The excise tax on cigarettes will increase by 35 cents, a compromise reached with House leaders to ensure the levy does not exceed that of neighboring Pennsylvania. The current 50 percent income tax deduction on the first $250,000 of business income will increase to 100 percent over two years. The rate on business income over $250,000 will fall to 3 percent. Nearly all of the tax increases proposed to offset cuts were stripped from the final plan. Gov. Kasich is expected to sign the compromise budget by the June 30 deadline.
Progressive lawmakers and political observers have decried the compromise budget as a huge giveaway to the wealthy. “While they are busy cutting taxes for the wealthiest Ohioans,” argued one editorial citing ITEP data, “lawmakers are ignoring their opportunity — and duty — to restore spending on essential services for children, working families, veterans, and old, poor, disabled, and mentally ill people, along with aid to local governments, that they slashed from previous budgets.” Worse, many of the budget negotiations were held in secret, with many of the state’s lawmakers kept out of the process. Dozens of amendments offered by progressive legislators that would offer more targeted tax credits to businesses that create jobs and increase funding for education were rebuffed.
An ITEP analysis of the compromise plan found that the top one percent of Ohio taxpayers would get half of the income tax cuts – an average annual tax break of $10,236 for those making $388,000 or more. Meanwhile, the bottom 20 percent of taxpayers would see their taxes increase by an average of $20. After years of slashing budgets and big tax giveaways to businesses and the wealthy, Ohio can ill afford this budget. Leaders in the Buckeye state should invest in all its residents, instead of shifting the buck to those who are struggling to make ends meet.