Ohio Political Report: Gov. Kasich’s ‘tax reform’ budget calls for lower income taxes & a higher sales tax
By OAR Buzz
The Ohio Association of REALTORS Public Policy team — Paul Glass and Scott Williams — offer the latest insights on Gov. John Kasich’s Fiscal Year 2016-2017 budget.
While still awaiting specific language, details have emerged indicating the plan will call for a variety of “tax reform” proposals. The goal of lowering the state income tax and cutting small business taxed would be offset by an increase in the oil and gas severance tax, a broadening of the sales tax base and a cigarette tax increase. In addition, under Gov. Kasich’s plan Ohioans would pay a half-cent more in state sales tax.
The overview documents released by the Administration does not include an expansion of the state sales tax to real estate or real estate-related services. The proposed expansion to services looks to include cable television, parking, lobbying, public relations, consulting, travel packages and debt collection.
Gov. Kasich’s other tax reform proposals include:
- An increase in the severance tax on oil and gas wells to 6.5 percent, with the money being used for the income tax cut as well as a special subsidy to counties in which most of the hydraulic fracking is taking place.
- An increase in the commercial-activities tax (CAT) on larger companies from 0.26 percent to 0.32 percent.
- Requiring the state sales tax to be assessed on used car and watercraft trade-ins as well as means test several income-tax loopholes for those making more than $100,000 a year.
- A $1 per-pack increase in the cigarette tax, which would be used to help stem Ohio’s infant mortality problem.
- Gov. Kasich is proposing a 23 percent income tax cut combined with other tax increases shakes out to a net $500 million tax cut. The tax cut proposal would trim Ohioans’ income taxes by 15 percent this year and 8 percent next year. The new top tax rate would be 4.1 percent, compared to 5.9 percent when Kasich initially took office.
- His budget would virtual eliminate the state income taxes on Ohio’s 971,000 owners of small businesses (defined as those with gross annual receipts less than $2 million) retroactive to the beginning of 2015, which would save those filing as “pass-through entities” an estimated $696 million over two years.
- Governor would also raise the personal exemption on state income taxes for the more than 3 million Ohioans making $80,000 a year or less, which would result in an estimated savings of $372 million over two years.
In addition, the Governor’s budget also proposes:
- Caps of 2 percent this year and a freeze in 2016 on public college tuition. A new $120 million debt relief fund would be formed to help financially ailing Ohioans pay off student loans. Another $2 million would be earmarked to implement “best practices” to prevent sexual assaults on campus.
- A net increase of several hundred million in funding to Ohio’s traditional public schools. The Governor also wants to start weaning Ohio school districts off the “guarantee” — a minimum state funding level guaranteed regardless of the amount the school-funding formula says should go to a district.
- Opening the door to charter schools tapping local schools’ levy money, while at the same time cracking down on operators/sponsors of failing charter schools.
- A new co-payment requirement for Medicaid recipients making more than the federal poverty level.
- More aid to fight toxic algae.
- An additional $118 million for early childhood programs, including expanded public preschool, improved education offerings for youngsters in subsidized child care and mental-health counseling for children in need.
- A loosening of state requirements on higher-performing public schools.
- A new provision allowing community colleges to offer some four-year degrees and permit adults to receive college credit for life experience.
- Raising the personal exemption on state income taxes for the more than 3 million Ohioans making $80,000 a year or less, which would result in an estimated savings of $372 million over two years.
- Elimination of “cliff” faced by those receiving child-care subsidies, which now disappear once a family’s income exceeds 200 percent of the federal poverty level. Kasich wants to raise the cutoff to 300 percent, with a gradual ramping down of state aid after the 200 percent threshold.
- Adding $375 million into the state’s rainy day fund.
OAR will conduct an exhaustive review of the budget — centered on its impact on property ownership and real estate professionals — and provide updates as they become available.