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A new study points to tax breaks that work against the larger economic interests of Ohio
Published on Sunday, Oct 05, 2008
How will the state make ends meet? A report unveiled last week by Policy Matters Ohio should be close at hand as the governor and lawmakers put together the budget. In ''Limiting Loopholes: A Dozen Tax Breaks Ohio Can Do Without,'' the Cleveland-based think tank identified as much as $270 million that could be redirected to better use.
That may not seem like much in a $26 billion a year spending plan. Then again, a relatively small sum can make a huge difference for students struggling to cover college tuition or superintendents looking to enhance the quality of education. Ohio has limited resources. It cannot afford to spend the slightest amount inefficiently or ineffectively.
What did Policy Matters Ohio find? Apply a means-test to three property-tax reduction programs, including the homestead exemption for seniors, and the state could redirect an estimated $120 million a year. The commercial activity tax carries much appeal because of its broad base and low rate. Unfortunately, lawmakers already have begun to carve exemptions. One favors two distribution centers in the Columbus area, at a cost of $6 million a year. Another permits certain trusts to choose: Pay the income tax or the commercial activity tax. They opt for the less costly, a loss of $18 million a year.
Only Ohio allows payday lenders, mortgage brokers and other financial companies to pay taxes at a lower effective rate than banks. End the favoritism, and the state would gain more than $10 million annually. Bob Taft and George Voinovich rightly updated the tax code by applying the sales tax to a larger number of services. Policy Matters Ohio calculates that eliminating the exemption for lobbyists and debt collectors would generate $33 million a year.
In 2006, lawmakers loosened the residency test for paying state income taxes, easing the burden on many higher-income Ohioans. As it is, the state has one of the least restrictive definitions of residency. Return to the previous standard, and the state would collect annually an additional $25 million.
Policy Matters Ohio barely has made a dent in the total number of tax exemptions, 143, amounting to a projected $7.1 billion in 2009. There may be more worthy targets. The report reiterates the need to examine these exemptions, something the state has neglected for years. What better time than now, the governor determined to turn around Ohio, that task requiring an enlightened deployment of resources?
Get the full article here.
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Posted 10:00 AM, 10/06/2008
We should definitely end the favoritism towards payday lenders. In addition to getting tax breaks, they've been exempt from Ohio's usury laws for over 10 years, allowing them to charge 391% APR. Over 300,000 Ohioans are trapped in debt each year as a result of using the defective payday lending product. We need reasonable restrictions on interest rates on payday loans and need to end the debt trap for Ohioans. Vote yes on issue 5!
