Is the moment right for another reduction in state income taxes? John Kasich argues the answer is an emphatic yes. The governor has proposed an exchange: an increase in the severance tax on oil and gas drilling for lower income taxes, a cut of roughly 5 percent by 2016. For his part, Tom Niehaus, a fellow Republican and the Senate president, isn’t so sure about the idea.
Niehaus told the Columbus Dispatch last week that it makes sense to review the severance tax in view of the boom taking shape in Ohio. He then shared his reluctance about adding a tax cut. “I still think there is a lot of uncertainty about federal funding that we get, particularly for Medicaid” he explained. “If the federal government chooses to reduce the percentage it provides to the state, we could be talking hundreds of millions of dollars.”
The senator doesn’t have in mind just an expanded state role in funding Medicaid as a result of federal health-care reform. He also is alert to the debate in Congress, many Republicans pressing for deep reductions in spending that easily could affect states. A similar framework has been applied in Ohio, where the governor and lawmakers balanced the state budget largely via steep reductions in money flowing to local governments.
Adopt a posture of reasonable caution is the appropriate counsel of the senator. More, Niehaus warns about the puny size of the tax cut, around $40 a year for the middle fifth of Ohio residents, those with annual incomes between $32,000 and $49,000. “Typically, I think the average person has big numbers in mind,” he told the newspaper. “They think it’s going to be $100 or $200. Well, if it’s $40, they may go, ‘Where was my income tax cut?’ I’m concerned about creating expectations and then falling short.”
Worth adding is that Ohio already has reduced state income tax rates by 21 percent since 2005. The Statehouse has set in motion the elimination of the estate tax. Meanwhile, as John Higgins, a Beacon Journal staff writer, reported last week, school districts have begun to send layoff notices to teachers, 23 in Coventry, four in Woodridge, a likely 140 in Akron. School districts across the state are coping in this way and others with a state budget that routed $1.8 billion less to their systems.
No question, districts must run more efficiently. Is it wise to invite increased class sizes or the curtailing of academic and extracurricular programs?
A sound tax system involves such things as lower rates and a broader base. It also must generate sufficient revenue to meet the state’s needs and priorities. In his way, Tom Niehaus demonstrated refreshing leadership, expressing concern about Ohio having the necessary resources.