Ohio House delays governor's income tax plan

JULIE CARR SMYTH AP Statehouse Correspondent Published:

COLUMBUS, Ohio (AP) -- Ohio Gov. John Kasich pledged Friday to fight a legislative effort to sideline his proposal to increase oil and gas drilling taxes and link the proceeds to an income-tax cut.

Ohio House Finance Chairman Ron Amstutz, a fellow Republican, issued a statement late Friday indicating there is insufficient time to answer key questions about Kasich's tax proposal.

Amstutz said the House is "taking extraordinary steps" to consider Kasich's so-called mid-biennium review, essentially a full state budget that he's offering outside Ohio's normal two-year budget cycle. The bill was unveiled Wednesday and introduced Friday.

"Given the size of this set of recommendations, we are beginning an 'all hands on deck' process to give full attention to the necessary work ahead of us," Amstutz said. "My initial sense is that many of the provisions of this legislation make sense and will result in improvements for our citizens."

But Amstutz said Kasich's revisions to the state tax code are simply too complex to handle in a limited amount of time. Most state lawmakers are up for election this fall.

Kasich has proposed raising the severance tax on oil and gas extraction to 4 percent in two or three years. Money raised would fund income tax reductions, with cuts deepening as proceeds rose. The administration estimates the amount collected to rise to between $1 billion by 2016, which could trim income tax rates by 5 percent.

"This aspect of the proposal touches on a high priority for our caucus: making's Ohio's tax burden as equitable and competitive as possible," Amstutz said. "However, the more the members of our caucus have learned about this particular proposal, the more concerned I've become that there are key questions that cannot be sufficiently answered and resolved within the available legislative time frame -- especially in light of all the other legislative work on our plate."

Kasich hastily called a news conference to express disappointment in the decision. He accused special interests of lobbying lawmakers to get the plan scrapped, and said he would keep pushing.

Terry Fleming, director of the Ohio Petroleum Council, reacted to Kasich's plan with caution when it was unveiled Wednesday.

"Recent industry investments in Ohio are based on a tax and regulatory structure that was just put in place in 2010," he said in a statement. "Any change to that structure could drive away investment from the state, and send local jobs with them."

Kasich dismissed the idea that hiking the tax would discourage investment.

"Why is it that every other state has a higher severance tax than we have, and why is it that Chesapeake and MarkWest just announced an almost $1.5 billion investment in the state?" he asked. "That's a point of view that really has no credibility. It's a silly argument, and there's no relation to reality."

Kasich said he had told energy companies eyeing development in Ohio all along that the tax hike was coming, "and I just think they got the sense that they could stop it."

The governor said the public would be on his side once they realized oil and gas drillers were paying just 20 cents for a barrel of oil.

Amstutz said the severance-income tax portion of the bill would be placed into a separate bill to be considered at a later date. The rest of Kasich's sweeping plan -- which also includes changes to education and health care policy -- will be offered in the House on Tuesday.

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Online:

Ohio House of Representatives: http://www.house.state.oh.us

Ohio Governor's Office: http://www.governor.ohio.gov