Bad Budgets Become Law in Ohio and Wisconsin

Legislative sessions are ending, new fiscal years are beginning and Governors in both Ohio and Wisconsin signed budgets into law this weekend.

Despite a series of Institute on Taxation and Economic Policy (ITEP) analyses published by Policy Matters Ohio (PMO) which showed that the wealthiest Ohioans would receive an outsized tax cut of ($6,000 on average) from a plan proposed by House and Senate Republicans, Ohio Governor John Kasich signed into law the tax cut legislation on Sunday. The new law include an across-the-board, 10 percent income-tax rate cut (which reduces taxes for high earners more than low), a deduction for pass-through business income (a giveaway to the wealthy), an increase in the state sales tax from 5.5 to 5.75 percent (a larger burden on low income families) and the introduction of a 5 percent, nonrefundable Earned Income Tax Credit. But that modest credit for working families was not enough to redeem the overall distribution of the bill: ITEP found that the only income group to see a tax increase from the legislation would be the bottom twenty percent. Governor Kasich may be “proud of the tax cuts” but he’s wrong to call them “another installment in Ohio’s comeback.”

Wisconsin Governor Scott Walker also signed into law a budget Sunday that included income tax cuts totalling more than $650 million. The tax plan reduced income tax rates from 4.6 percent, 6.15 percent, 6.5 percent, 6.75 percent, and 7.75 percent to 4.4 percent, 5.84 percent, 6.27 percent, and 7.65 percent. The legislation also reduced the number of tax brackets from five to four. ITEP analyzed both the Governor’s initial proposal and another from Representative Dale Kooyenga. We found both plans were regressive and benefited wealthy Wisconsinites more than low and middle-income families. According to the Legislative Fiscal Bureau (PDF), the permanent tax cuts signed by Governor Walker will cost the state $632.5 million over two years and the distribution is, like Ohio’s new law, skewed to benefit the wealthiest Wisconsinites. Even worse? The budget Governor Walker just signed also  created a structural deficit of $505 million in the next biennium.