From ONA Executive Director Dennis Hetzel:
The following article from Gongwer News Service illustrates why ONA members cannot let down their guard on the subject of sales tax expansion. Some form of this may return to the Legislature in the spring.
ONA members are urged to continue to stress to local legislators and your local government officials that vastly expanding the state sales tax to business-to-business services, including advertising, will have profound negative impact, not only on newspapers but economic growth as a whole.
As always, ONA has resources available to help. Let us know what you need. Our media coalition website, www.noadtax.com, has many resources and talking points.
Meanwhile, in Washington, leaders are proposing limitations on the advertising tax deduction for federal purposes as part of tax reform proposals. This, too, would be devastating, and ONA is personally contacting every member of the Ohio delegation to add our concerns. I will be visiting key members personally in Washington in early December.
Elsewhere in today’s Bulletin, you will find additional articles about the activity in Congress. Updated talking points are available by clicking here. We urge you to add your voice.
Counties brought to a Senate study panel this week a to-do list of various tax and fee options to help bolster their budgets after years of declining state funding for local governments.
During a hearing of the Senate Tax Reform Subcommittee, the County Commissioners Association of Ohio voiced support for expanding the sales tax base to more services – an idea that Gov. John Kasich proposed in his biennial budget (HB 59), but was subsequently removed after broad opposition from business groups.
Brad Cole, CCAO’s managing director of research, said counties are charged with administering dozens of state-authorized programs but “have been challenged to implement the tasks delegated given the funding available.”
County revenues would benefit from expanding the sales tax base, he said, but warned against limiting increases for counties, as Gov. Kasich had proposed in his budget.
“If the state should decide to broaden the definition of goods and services subject to the tax, CCAO believes counties should benefit from this base-broadening and not be subject to state-imposed rate or revenue reductions,” he said.
Noting that 48 of the 88 counties have already reached the maximum 1.5% permissive sales tax limit, Mr. Cole also recommended increasing the limit to 2%. This would allow commissioners more flexibility to reduce local property taxes since they can roll back inside millage, he said.
County clerk of court fees and probate court fees, which were last increased in 1992 and 1976 respectively, should also be raised to offset counties’ large costs of administration of justice, he said.
CCAO also supports additional authority for counties to enact permissive motor vehicle license taxes to generate more funding for county roads and bridges, Mr. Cole said, noting they have not increased since 1987. Thirty-four counties levied the maximum combined $15 fees. “Since 1987 the construction price index has increased substantially,” he said.
Mark Partridge, professor at Ohio State University’s Agricultural, Environment and Development Economics Department, said Gov. Kasich’s unsuccessful attempt to broaden the sales tax base to services was sound economically, if not politically.
The same principal of eliminating favors for certain industries should be applied to the personal income tax, he said, calling for elimination of deductions and credits to lower the rate. “In doing this, it is not clear that certain forms of income, say capital income, should be favored over other sources of income, say wage income.”
Mr. Partridge also recommended: expanding the earned income tax credit to offset the heavier impact the sales tax has on low-income workers; increasing the severance tax and eliminating industry-specific tax incentives.
“Economists have long shown the ineffectiveness of these incentives. Often, they reward firms for what they were going to do anyway,” he said.
Jon Honeck, director of public policy for the Center for Community Solutions, asked the panel to support a proposal to require a periodic review of tax credits, deductions and exemptions.
“Many of these provisions have been in place for decades, and may no longer be needed. Others may have evolved to create unintended consequences or give their recipients far greater or lesser tax advantages than legislators originally contemplated,” he said.
Mr. Honeck noted that Rep. Terry Boose (R-Norwalk) has introduced a proposal (HB 24) to create a joint committee to evaluate tax expenditures on an eight-year cycle and recommended that the panel use certain criteria to determine their effectiveness.
Gavin DeVore Leonard, state director of One Ohio Now, said recent tax cuts have seriously affected local governments and urged members to reconsider plans to use savings from expanding Medicaid eligibility for another income tax reduction (SB 210).
“The income tax is the only major progressive tax in our state and as its size is reduced, our revenue system becomes more and more regressive. We need to maintain a strong income tax in Ohio,” he said.
Mr. Leonard said Ohio’s job creation ranking at 47th in September was at odds with claims that the 21% income tax cut would improve the state’s economy. “Income tax changes in particular have been made in the name of prosperity and growth, but we simply have not had the growth that was promised.”