In this fiscal year, Ohio will forgo a projected $7.5 billion in revenue via assorted tax credits, deductions, exemptions and exclusions. That sum equals roughly 30 percent of spending in the state general revenue fund, and yet these tax expenditures receive little, if any, scrutiny at the Statehouse. Once enacted, they tend to endure, some even dating to the 1930s and ’50s.
The hope is, that soon will change. Republicans in charge of the Ohio Senate have delivered on a promise. During the budget debate in the spring, they pledged to take up the matter of tax expenditures. On Thursday, the Ways and Means Committee conducted a hearing, receiving testimony from three leading proponents of applying a close eye to the tax breaks, the Buckeye Institute for Public Policy Solutions, the Greater Ohio Policy Center and the Center for Community Solutions. The appeal of the trio is how they range widely across the political spectrum.
They drove the effort earlier in the year, and last week, they reaffirmed for lawmakers their compelling case. They included a reminder of their call for the immediate elimination of a package of outdated and ineffective tax breaks. They reiterated the need for establishing a sunset provision, all such relief ending at a certain time, unless lawmakers opt to renew.
Greg Lawson of the Buckeye Institute stressed that erasing unproductive tax breaks opens the way to a broader tax base and lower rates. He rightly compared a careful review to performance audits. Gene Krebs of the Greater Ohio Policy Center highlighted another recommendation of the three organizations from the spring: the need to examine the framework of state and local taxes, tax expenditures too often inviting communities to compete when they should be thinking as a region as they pursue economic development.
Krebs made this accurate assessment: “Ohio’s state and local governments are the solutions of yesterday for the problems of tomorrow.”
For his part, Jon Honeck of the Center for Community Solutions argued, correctly, that tax expenditures amount to spending in another form, and thus must be evaluated for their usefulness. He reminded that eliminating tax breaks does not affect overall tax rates. More, he pointed to other states taking the lead, notably Missouri, Kansas, Iowa and Washington, all alert to how such steps can enhance a state economy.
Most telling, here is a potential source of revenue, when cities and school districts are struggling, when the state must invest in talent and innovation, when the cost of a college education leaves so many students deep in debt. To be sure, many tax expenditures may continue to make sense. What Ohio needs is a process for asking the question about cost and benefit. That is why it is important that lawmakers get this job done, the three groups testifying last week reflecting the consensus necessary for action.
