Conservative, Liberal Groups Dissatisfied with Ohio Budget

by Tyler Arnold

 

Neither right-leaning groups nor left-leaning groups are satisfied with Ohio’s changes to the tax law included in the two-year operating budget that was passed by the state legislature on Wednesday and signed into law by Gov. Mike DeWine on Thursday.

The Buckeye Institute, a free-market think tank, says the state increased spending by too much, preventing it from providing additional tax relief. On the opposite side, the progressive think tank Policy Matters Ohio said that too many tax cuts prevented the legislature from securing more investments in the state through spending programs.

The budget eliminated the bottom two income tax brackets, which means that Ohioans who earn less than $22,500 will pay no income tax over the biennium. All other Ohioans will receive a four percent across-the-board tax cut on their personal income taxes, which is a smaller reduction than earlier proposals. The House’s initial proposal would have cut income taxes by 6.6 percent across the board and the Senate’s initial proposal would have cut them by 8 percent.

A tax credit designed to help small businesses will also stay in the books despite an attempt by the House to reduce the credit, which exempts eligible businesses from paying 75 percent of their taxes on the first $250,000 of their income. The House sought to lower this threshold to only apply to the first $100,000 of income.

Because of a budget surplus, the state legislature was also able to increase spending. K-12 education spending will reach historic levels through a 4.1 percent spending increase in the first budget year and another 2.1 percent increase in the second year. It also provides more funding for wrap-around programs.

The budget also provided more spending on some environmental initiatives and healthcare initiatives.

The bill will also maintain two industry-specific tax credit subsidies, which were opposed by both groups. This includes the Motion Picture Tax Credit, which makes the tax subsidies accessible to the film industry, and the NetJets tax subsidy, which funds luxury business jets.

Robert Alt, president of The Buckeye Institute, said in a news release that he is supportive of the tax cuts but he thought the state could have taken it further if they had reined in spending.

“Policymakers passed up the opportunity to adopt greater tax reform that would have allowed Ohioans to keep more of their hard-earned money and would have spurred greater economic growth and refused to rein in government spending. Instead, policymakers increased spending by another $1.4 billion over what the Senate passed just four weeks ago,” Alt said. “This unsustainable level of spending endangers Ohio’s ability to weather future economic downturns.”

Wendy Patton, senior project director for Policy Matters Ohio, said the opposite in a news release. She praised the legislature for its increased spending, but criticized them for maintaining certain tax cuts.

“The General Assembly missed a golden opportunity to scale back the unproductive $1.1 billion business income tax deduction, also known as the LLC loophole,” Patton said. “Instead, it only made a small tweak to limit lawyers and lobbyists from receiving it. Though they have become the poster children for reform, they make up just a small share of those getting the tax break.”

There are 38,000 lawyers in Ohio, Patton noted, and many don’t benefit from the LLC loophole. And as of July 16, there were 1,509 registered lobbyists in the state, she added.

“Yet in tax year 2017, nearly 700,000 people claimed the deduction,” Patton said. “The $528 million a year the state could have saved from scaling back this unproductive tax break could have allowed policymakers to raise eligibility for child care assistance, adopt a refundable Earned Income Tax Credit, and make college more affordable.”

The budget received bipartisan support, but did have some dissent from Democrats. It passed the House 75-17 and the Senate, 29-1.

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Tyler Arnold reports on Virginia, Ohio and Michigan for The Center Square. He previously worked for the Cause of Action Institute and has been published in Business Insider, USA TODAY College, National Review Online and the Washington Free Beacon.
Photo “Mike DeWine” by Mike DeWine.

 

 

 

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