Taft unveils $2.3 Billion tax-hike proposal

Dayton Daily News ^ | 31 January 2003 | William Hershey

[Deadeye Division]

Coshocton Tribune

Taft tax increase plan a bitter pill for everyone

By Jim Siegel

C O L U M N
Don't worry, there are plenty of Ohioans who won't be impacted by the tax increases proposed by Gov. Bob Taft over the past two weeks.

For instance, if you're one of those people who don't smoke, drink, own a vehicle or put gas into one, no tax increases for you.

If you're not planning to buy a house, trade-in a used car or make local telephone calls, you can go on worrying about other things.

If you don't subscribe to cable TV, read the newspaper, or attend sporting events, movies and concerts, then this tax fuss means nothing. So let's stop focusing on the few people who will be paying more under Taft's plans and instead start talking about those Ohioans who, thanks to the decision to not impose an across-the-board tax increase, can go on with life as if a multibillion-dollar deficit never existed.

Hmmm...

OK, so maybe Taft's tax increase proposals managed to tick off just about everyone.

As this column noted a few weeks ago, picking which tax exemptions to eliminate doesn't make the situation any more tolerable than, say, a 1-cent sales tax hike, which would have raised roughly the same amount.

But for all the anger pouring out of Capitol Square, and the entire state for that matter, this still appears to be a more preferable option to plunking a penny on the sales tax. For one thing, Taft is attempting to right a tax system in Ohio that has progressively shifted away from business and toward individuals.

"We are asking corporations to do more to pay their fair share," Taft said.

Over the years, corporate accountants have worked their magic on Ohio's tax code. Take, for example, the corporate franchise tax. Back in 1972, the tax accounted for 16 percent of Ohio's general revenue fund. Today, it's less than 5 percent.

Ohio's franchise tax rate, meanwhile, is significantly higher than many states, including Indiana and Kentucky. But Ohio collects just $67 per capita from the tax, half the national average. Many of Ohio's largest corporations actually pay less than smaller ones.

But by tightening the tax and stopping the practice of corporations shifting income to out-of-state entities, Taft can lower the overall tax rate and still increase revenues.

State Tax Commissioner Tom Zaino said Taft's two-year, $1.3 billion plan will be split 50-50 between business and individuals. On the other hand, if Taft had simply bumped the sales tax another penny, businesses would have paid only one-third of the cost.

Besides, many exemptions in the current tax code are tough to justify. Why, for example, do we pay a sales tax on a gym membership but not on a tanning session? Or why do we pay tax a movie rental but not when we order from pay-per-view?

The other option is to raise no new money, which Taft believes will outright cripple state government.

But conservative lawmakers don't see that situation. They say Taft is creating a "sky is falling" picture of state government, noting that state spending increased over 33 percent from 1998 to 2003.

What that number doesn't explain is how Medicaid costs - the biggest single portion of the budget - have increased 13 percent, then 15 percent in the last two years. The state also has been pouring much-needed money into primary and secondary education.

In fact, after the last round of cuts, 42 of 68 state agencies funded by general revenues are spending less in fiscal year 2003 than they did in 2000.

So what's worse than a government you think spends too much? How about a government that still spends $20 billion a year but is spread so thin it struggles to accomplish anything?

Jim Siegel is the Gannett Columbus Bureau Chief.

Originally published Saturday, February 1, 2003