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Governor unveils Ohio's monumental tax shift
Income tax would go down, drilling taxes would go up and the sales tax would do a little of both

Bill Cohen
Gov. Kasich, Budget Director Tim Keen and Tax Commissioner Joe Testa explain the shift in what Ohio taxes and how much.
Courtesy of KAREN KASLER
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In The Region:

Gov. John Kasich is proposing a major shift in Ohio’s tax structure.

Under the plan he released today, billions of extra dollars would flow in from an expanded sales tax, but that would be more than offset by an even bigger lowering of the state income tax. And the overall sales tax RATE would come down.

Statehouse correspondent Bill Cohen helps us sort out the ups and downs in this report.

COHEN: Ohio's tax shift

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Ohio Gov. Kasich is proposing a net $1.4 billion tax cut over three years, much of it for small businesses.

“About 50 percent of the jobs in this state are created by small business,” Kasich said in announcing his budget. “And we want to do everything we can to encourage job growth in small businesses.”

Kasich plans to cut in half the income taxes for small businesses on their first $750,000 in earnings.

And he wants to cut income taxes for Ohio families overall – 20 percent over three years, plus a one-time 4 percent tax cut on this year’s taxes.

Kasich says none of that will cut into the state’s rainy day fund.

Sales tax becomes the big piece of the pie
And the governor also wants to cut the state’s sales tax rate from 5.5 to 5 percent.

He’d pay for the cuts with an increase in the severance taxes oil and gas drillers pay. And he would broaden the base of the sales tax to include many services that are now exempt.

Tax Commissioner Joe Testa says that makes sense as the sales tax has been shifting from goods to services for a while. Gov. Kasich says he wants to see it applied to “lawyers, architects, accountants and lobbyists.”

It also would apply to parking lots, arts, entertainment and recreation.

Still Kasich says his tax cuts far outstrip any hikes.

For decades, pie charts have shown the state income tax as the largest slice. But that would change if lawmakers adopt Kasich’s budget; the sales tax would become the largest.

Shifting the burden?
The liberal think tank, Policy Matters Ohio, says Kasich’s plan continues a long-time shift in taxes to the middle class.

“When we cut taxes in 2005, people in that top 1 percent, they got nearly 10 grand on average a year in a tax cut. The people in the middle got 180 bucks,” says Policy Matters’ Zach Schiller. “The fact is that when you cut the income tax -- because of its graduated rates -- the bulk of the savings goes to people who don’t need it, and (that) will further exaggerate the inequality that has been growing here as it has around the country.

But Ron Amstutz likes the changes. He’s the House Finance Committee chairman and, like Kasich, is a Republican. He calls Kasich’s plan one of the two largest tax reforms he’s seen in his 32 years as a lawmaker.

In 2009, when Kasich announced he was running for governor, he loudly proclaimed the need to do away with the income tax:

 “We march over time to destroy that income tax that has sucked the vitality out of this state.”

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