Up and down, back and forth with state taxes
Thomas Suddes
Ohio’s unemployment rate in May, just announced, was 5.2 percent. It was 9.6 percent in November 2010, when Republican John R. Kasich unseated Democratic Gov. Ted Strickland. And Ohio’s Republican-run Senate has just passed a budget with tax cuts, the Columbus Dispatch reported, that “would bring Ohio’s income-tax brackets to the lowest rate since 1981.”
Those two facts bolster Kasich’s all-but-official presidential campaign. And, in the main – in the main – those two facts offer some good news – some – to salt-ofthe-earth Ohioans, men and women who obey the law, raise good kids, and look out for their neighbors.
But here’s the irony: The purported strategy of Franklin D. Roosevelt’s New Deal Democrats was “spend and spend, and tax and tax, and elect and elect.” Today in Ohio, the arguable political strategy of Statehouse Republicans is “spend and spend, and cut and cut, and elect and elect.” And “spend and spend” isn’t a typographical error. General Revenue Fund spending (including federal Medicaid grants) was about $12.4 billion in Ohio’s 1981-83 budget. That was just before Democratic Gov. Richard F. Celeste’s celebrated “90 percent tax increase,” the gift that keeps on giving Republicans control of the Ohio Senate. As proposed by Amended Substitute House Bill 64, the budget the Senate passed Thursday, comparable General Revenue Fund spending for Ohio’s 2015-17 budget would be about $71.3 billion.
Agreed, over decades, inflation accounts for some of that huge rise in spending, but hardly all of it: Just ask those trueblue Ohio House Republican conservatives who voted “no” in April on the House’s version of the proposed 2015-2017 budget.
How does this conjuring trick – (some) taxes down, but state spending up – work? Common Core math? The vile machinations of the Lizard People? Secular humanism? One part of the answer: The U.S. Treasury pays for more than half the tab for Ohio’s federal-state Medicaid health care program. According to the Legislative Service Commission, “federal reimbursements represented 60.6 percent of total General Revenue Fund Medicaid spending” in the fiscal year that ended June 30, 2014.
But the major reason why the “now-you-see it, now-you-don’t” Statehouse cuts-with-spending gizmo works in Columbus is burden shifting. Ohio’s sales tax, 4 percent in the 1970s, is now 5.75 percent – and Kasich wanted it boosted to 6.25 percent. And beginning in the ’60s, the General Assembly let counties impose local, “piggyback” sales taxes (and license plate- and other fees, too). Republican then-Gov. James A. Rhodes, sly as they come, decided to let local officials, not state officials, take the heat for tax increases. Today, Ohio’s combined state and local sales tax rates ranges from 8 percent (in Cuyahoga County) to 6.5 percent (in Lorain, Stark, Wayne and Butler counties). The sales tax is 7.5 percent in Franklin County, 7.25 percent in Montgomery.
Then, in 2005, the General Assembly, during Republican Gov. Bob Taft’s administration, phased out the nowabolished property tax on business equipment and inventories, something business lobbies demanded for decades. Repealing that tax was supposed to make Ohio the New Jerusalem, economically. It didn’t. Legislators “replaced” the business property tax with the Commercial Activity Tax (CAT) on businesses’ gross receipts.
All proceeds of the personal property tax went to public schools and local governments. But CAT proceeds – which are less than the bonanza predicted – are shared with the state. Anyone who thinks tangible property tax repeal didn’t spur more local tax levies is smoking something many people think should be legal. Because, in practical terms, dogmatic tax cuts at the Statehouse lead to tax increases or service cuts in Ohio’s counties, cities and school districts.