Testa makes case again for Kasich's tax reform package

By MARC KOVAC @ohiocapitalblog C-N Capital Bureau Published:

COLUMBUS -- The head of the Ohio Department of Taxation again made the case for Gov. John Kasich's latest tax reform package before a legislative panel.

And, again, Republican and Democratic lawmakers didn't offer vocal endorsements or indicate the proposed increase in tax rates on cigarettes and other tobacco products, commercial activities and oil and gas produce via fracking or the corresponding across-the-board income tax cut was on a fast track for passage anytime soon.

Much of Tuesday's hearing in the Ohio House's Ways and Means Committee was a repeat of comments made by Tax Commissioner Joe Testa earlier this month, after Kasich unveiled his mid-biennium budget package.

Republicans in the Ohio House have since split the larger legislation into more than a dozen bills that are being considered in separate committees.

Testa's testimony Tuesday included an overview of tax reforms implemented since the governor took office, including continued rate cuts for individuals and businesses.

Testa also offered further evidence of the need for more reductions, saying the state's tax rates are hindering business growth.

"We have made progress, but still, over the last 10 years, states with no personal income tax performed best in gross state product, job creation and population growth," he said. "... Leading economists believe and economic studies show that high income taxes harm job creation."

He added, "Lowering income tax rates will not only help keep Ohioans in Ohio, it will also lower the cost of doing business for our small business employers so they can grow and create even more jobs for Ohioans."

Kasich has proposed an 8.5 percent income tax cut over the next three years, plus an increase in the state's earned income tax credit and personal and dependent exemption rates for residents earning up to $80,000.

Those tax cuts would be covered via increases in cigarette taxes to 60 cents a pack over two years (to $1.85 from $1.25), other tobacco taxes to bring them in line with cigarettes and the commercial activity tax to .3 from .26 percent.

The governor also has outlined a revamped plan to increase taxes on oil and gas produce via horizontal hydraulic fracturing.

"This is a tax package," Testa said of the overall proposal. "Each element is necessary for the package to be effective in lowering the personal income tax rates for all Ohioans..."

Rep. Jack Cera (D-Bellaire) said small communities in his district have had to seek voter approval for tax hikes to cover the loss of state funding.

"Aren't we just forcing these locals now to increase their income taxes, which is going to alleviate or reduce the benefit of having state income tax cuts...?" he asked.

Testa said the total tax package, including an expanded earned income tax credit and exemptions for lower income residents, would benefit all taxpayers, and cuts to local government funding were much smaller than purported when considering overall state funding.

"We're talking about a 2, 2.5 percent (decrease in local government funding) compared to all state funding to local governments as a whole," he said, adding, "I don't think that is all that burdensome."

Republicans also questioned the administration plan, asking whether an increase in cigarette taxes would push smokers to buy their supplies outside of Ohio.

Rep. John Adams (R-Sidney) asked a tax policy analyst whether cutting tax rates without increasing other taxes would make the state more competitive.

And Rep. Lou Terhar questioned analyses that support the governor's tax package that do not take into account local taxes.

"Ohio is one of the few states that has major municipal taxes, county taxes and a whole range of taxes that other states do not allow," he said.

Want to leave your comments?

Sign in or Register to comment.