COLUMBUS -- Gov. John Kasich unveiled a package of mid-biennium budget proposals Tuesday that includes an across-the-board income tax cut largely backed by tax hikes on cigarettes and other tobacco products, oil and gas produced via fracking and commercial activities at larger businesses.
Other proposals officially introduced in legislative form in the Ohio House include increased efforts to prevent children from dropping out of school, help military men and women gain college degrees and employment and combat the abuse of drugs and tobacco in the state.
"We know what works: balanced budgets, tax cuts, better education and training, and a helping hand so everyone can benefit from a stronger Ohio," Kasich said in a released statement. "We've got to keep building on these ideas because they're lifting our state, and with the continued partnership of the legislature we'll keep that progress going for Ohioans."
The package will have a first hearing before the House's Ways and Means Committee today, with Kasich's budget director expected to provide testimony.
Democrats quickly offered criticism of some of the proposals, namely those related to tax cuts.
"The governor and his friends don't need another tax break, especially when it's paid for by raising taxes on businesses and lower-income Ohioans," House Minority Leader Tracy Heard, D-Columbus, said in a released statement.
"This is a reincarnation of the same failed economic polices that put individual wealth over the success of our economy, the strength of our middle class and the effectiveness of our schools and communities."
Kasich wants to increase the tax rate on cigarettes to $1.85 per pack from $1.25, and he wants to tax e-cigarettes and other tobacco products at an equivalent rate.
The move would place Ohio's rate higher than the national average of $1.53 per pack, according to statistics compiled by the Campaign for Tobacco-Free Kids. It would also make the state's rate higher than all surrounding states except Michigan, which taxes at $2 a pack.
On the fracking front, the governor wants to increase tax rates on oil and gas to 2.75 percent, a decrease from his initial severance tax proposal a couple of years ago.
He would exempt small conventional producers, as well as companies' initial drilling costs. And about 20 percent of the proceeds of the new tax would go to local government in shale oil and gas regions.
Among other tax-related proposals, Kasich also wants to increase Ohio's Commercial Activity tax (levied on gross business receipts of $150,000-plus) to 0.30 percent from 0.26 percent.
He would use increased collections to cut income tax rates by another 8.5 percent over the next three years. That would save a married couple with two children earning about $73,000 annually a total of about $350 compared to what they paid in 2011, the year Kasich took office, according to the administration.
The governor also wants to increase the state's earned income tax credit for low-income Ohioans to 15 percent of the federal credit from 5 percent and raise the personal exemption to $2,700 from $1,700 for Ohioans earning less than $40,000 and to $2,200 for those earning $40,000-$80,000.
Overall, the tax package would result in net tax cut of about $174 million over three fiscal year, according to the administration.
Other provisions in the overall mid-biennium budget package include:
• Increased efforts to prevent students from dropping out of school, including $10 million in funding from casino license fees for local mentorship programs and vocational education opportunities for middle schoolers.
• Changes aimed at making it easier for high school students to earn college credit.
• A new budget model that ties state funding of community and four-year colleges to graduation rates.
• Providing college credits for Ohio's military men and women to account for training they received while in the service, plus a fast track for veterans to obtain state licenses.
• Increased emphasis on drug abuse prevention and tobacco cessation programs.
The package drew mixed reaction Tuesday.
Richard Stoff, president and chief executive officer of the Ohio Business Roundtable, praised Kasich's efforts to further cut tax rates.
"Fact-based analysis conducted by Ernst & Young for the Roundtable shows that the governor's reform package taken as a whole will improve Ohio's overall business tax competitiveness, even when considering a tax increase on the commercial activity of business," he said in a released statement. "Ohio as a state will be better with a modernized severance tax that recognizes the bounty of our natural resources, a consumption tax that discourages cigarette smoking, lower effective tax rates on business and reduced income taxes to enable our citizens to keep more of their hard-earned money."
Oil and gas interests don't appear to be on board, however.
"If this proposal becomes law, it has the real potential to place a chilling effect on the short- and long-term economic value of this shale play," Chris Zeigler, executive director of the American Petroleum Institute of Ohio, said in a released statement. "This will not only negatively impact drilling and midstream development, but it could also jeopardize downstream growth in the manufacturing, chemical and polymers industries. ... If this proposal were passed, our members would pay 10 times more in gross receipts tax than any other Ohio industry subject to the commercial activity tax. This is simply unworkable."