Kasich Budget Increases, Broadens Sales Tax To Pay For More Income Tax Cuts

Jan 30, 2017

State lawmakers are sifting through the many policies listed in Gov. John Kasich’s last budget plan. The proposal reprises many of Kasich’s past reforms that he tried and failed to get through the Legislature in previous attempts.

The biennium budget proposal from Gov. John Kasich doles out $144 billion in appropriations over the next two years. The plan includes a slight increase to education funding, investing in new technologies and another income tax cut.

To pay for his 17% income tax cut, Kasich is bringing back a proposal to increase the sales tax rate by half a percent, from 5.75% to 6.25% and attach that tax to more things, such as cable TV and other services.

Kasich says, besides balancing a federal budget, achieving tax reform is the hardest sell.

“Because any time you propose a tax reform whoever’s being effected hires a bunch of people and then they -- or else they work over the members of the Legislature or the Congress and they block it,” said Kasich.

The income tax reform proposal would increase the personal tax exemption for people making $80,000 or less. It would also increase the low income tax credit. According to Kasich’s office, this would mean 350,000 more low income Ohioans would be exempt from paying any income tax.

However, the budget proposal attaches increased taxes to other things. A hiked alcohol tax would result in about one penny per can of beer or glass of wine. And a 65 cent tax increase on cigarettes would bring the total tax to $2.25 a pack.

Kasich says these numbers can be up for negotiation.

“So you ask for a lot and you get a little but a little is better than none.”

But when it comes to getting approval from the Ohio House and Senate, there’s one proposal for which Kasich isn’t holding his breath. He says it’s unlikely the Republican-controlled Legislature will approve his severance tax increase.

Ohio has one of the lowest taxes on oil and gas drilling in the country. Kasich fears that someday someone will put the issue on the ballot and at that point it would be out of their control how to appropriate that revenue.

“At some point somebody’s gonna do it. I don’t know where they are. I don’t know why they haven’t done it yet," said Kasich. "Frankly, I don’t like that approach because then the tax gets to be too high. But a reasonable increase that puts us in the sweet spot makes all the sense in the world.”

In what seems to be a first in the nation, Kasich’s budget would require public universities and colleges to pay for student textbooks. The institutions could recover up to $300 a student through tuition.

And along with increasing K-12 education funding by nearly $200 million, Kasich’s plan would also cut funding to schools that are dropping in enrollment.

“If a school district has fewer students, they should get fewer dollars. You don’t want to fund a school district that’s losing students, and to say that whether they’re in the seed or not we just have to give them a certain amount of money, you have to do it in a responsible way.”

Liberal groups have already come out to criticize Kasich’s budget, especially the tax restructuring formula. Advocates argue the income tax cuts don’t make up for the amount of money low and middle income Ohioans will pay in increased sales taxes.

Hearings for Kasich’s budget proposal begin in the Ohio House this week.