Big News in Ohio: Governor’s Unfair Tax Cut Plan Unveiled

Last week, Ohio Governor John Kasich released his “Transforming Ohio for Jobs + Growth” tax cut package. As we predicted, the plan includes an 8.5 percent across the board income tax rate reduction which would drop the top tax rate from 5.33 to 4.88 percent. The proposal also slightly increases the state’s small non-refundable Earned Income Tax Credit (EITC), introduces an extra exemption for low income families, and raises the cigarette tax. Institute on Taxation and Economic Policy (ITEP) staff quickly produced an analysis of the proposal’s main provisions. Policy Matters Ohio (PMO) published this analysis in their brief “Kasich Tax Plan: Advantage, Top 1 Percent” and concluded that better off Ohioans would do much better under the Kasich plan. In fact, the plan delivers annual tax cuts on average worth $2,847 to the top 1 percent of Ohio taxpayers while taxpayers in the bottom two-fifths on average would pay more than they do now.

Though increases in the EITC and the new personal exemption are small steps toward tax fairness, increasing tobacco taxes and cutting income tax rates would would be a step backward. PMO research director Zach Schiller says, “Boosting the EITC and personal exemptions for the least affluent are positive steps that would help low- and moderate-income Ohioans. But these measures do not change the fundamental math of the proposal:  It is an additional tax shift from those most able to pay to poor and moderate-income Ohioans.”

There is no guarantee that the proposal will actually become law. The anti-tax group headed by Grover Norquist called the proposal “less than inspiring.” Some lawmakers have already asked the fiscally irresponsible question about what it would cost to preserve the revenue cuts while removing the tax hikes from the plan, other lawmakers are asking for evidence that tax cuts actually create jobs. For those interested in political theatre this is a state to watch.  A recent editorial in the Toledo Blade predicts that the proposal “will dominate the legislative and campaign debates.” Stay tuned.