Dayton Daily News

By William Hershey

COLUMBUS — J. Kenneth Blackwell, the Republican candidate for governor, on Tuesday unveiled a plan to overhaul the state personal income tax system that he said would provide $1.2 billion in tax cuts for Ohio families and small businesses.

Blackwell, Ohio secretary of state, rolled out the proposal on the eve of today’s gubernatorial debate about the economy, against his Democratic opponent Ted Strickland, a U.S. House member from Lisbon.

In a press release, Blackwell said he would overhaul the personal income tax system in his first 100 days as governor.

Previously Blackwell had called for converting Ohio’s nine-rate personal income tax system over four years to a single-rate system, with a target rate of 3.25 percent. A study released Monday by Policy Matters Ohio, a Cleveland-based research group, said that such a system would increase taxes on most Ohioans while the richest Ohioans would reap thousand of dollars on average of tax savings.

Tom Norris, chief policy director for Blackwell’s campaign, said no one would pay higher taxes under the plan announced Tuesday.

The goal still is a single-rate system, but the plan would immediately remove four of the current nine brackets and assure that Ohioans now paying less than a 3.25 percent rate would receive a rate freeze and keep current deductions, the release said.

The plan would eliminate the income tax for taxpayers earning less than $20,000 a year, removing 900,000 filers from the tax rolls and cutting taxes for more than 300,000 small-business owners who pay primarily business taxes through their personal income taxes, the release said.

Keith Dailey, Strickland’s spokesman, said the plan “just doesn’t add up.”

The Hannah Report

Secretary of State Ken Blackwell returned to the flat tax question Tuesday following a study released by Policy Matters Ohio, which focused on the purported impact of an across-the-board 3.25 percent rate on the middle class. The gubernatorial challenger continued to emphasize tax amnesty for a vast number of poor Ohioans while also noting the apparent benefits of a $1.2 billion rollback on small business.

“With the third highest tax burden in the nation, Ohioans pay too much in taxes with little to show,” Blackwell said. “Our high taxes chase away good paying jobs and opportunities. As governor, I will cut taxes and create an environment that will bring jobs and prosperity back to our state.”

Blackwell said the plan offers “immediate total tax freedom” to filers earning less than $20,000 a year, removing nearly one million low income families from the tax rolls. In addition, he said, the plan would cut taxes
for over 300,000 small business owners currently paying primary business taxes through their personal income taxes.

The plan seeks the removal of four of Ohio’s nine tax brackets as a step toward a single-rate system.

Ohioans currently paying less than 3.25 percent would receive an income tax rate freeze and keep current deductions.

Blackwell also called for accelerating the General Assembly’s 21 percent income tax cut from five years to three years, one year faster than modifications currently proposed under HB626 (Calvert). He said the move would speed up tax cuts for 5.3 million Ohioans. Lost revenue would be offset by the 3.5 percent cap on state spending increases passed into law this summer — the so-called legislative TEL triggered by controversy over

Blackwell’s constitutional amendment — along with Medicaid savings recommended by the Ohio Commission to Reform Medicaid, and economic growth.

Blackwell pointed out that Illinois, Indiana, Michigan, and Pennsylvania already have the flat tax. He noted, however, that each state has varying levels of deductions based on personal income and other factors.

The Hannah Report

“Replacing Ohio’s graduated income tax with a flat, 3.25 percent tax would increase taxes on most Ohioans, while costing the state nearly half a billion dollars in annual revenue. Meanwhile, the richest Ohioans would reap thousands of dollars on average in annual tax savings apiece.”

That in a nutshell describes Ken Blackwell’s single-tax system, claims the Democratic-leaning Policy Matters Ohio — a proposal which the gubernatorial hopeful has billed as an across-the-board tax amnesty for nearly two million low-income families, but which the think tank says would shift most of the burden into an actual tax increase on middle-class Ohioans.

Based on a state-by-state analysis from the national Institute on Taxation and Economic Policy (ITEP), Policy Matters said Monday that under the Republican plan, families in Ohio with an annual income between $30,000 and $46,000 would face a net tax hike of $237 a year, while the top one percent of wage earners would enjoy a tax cut of nearly $14,000.

“A flat tax would make middle-income Ohioans pay more, so upper-income Ohioans could pay less,” concluded the report.

Characterizing ITEP’s ‘microsimulation’ model as a “true” picture of tax policies, the Ohio group said the report compared a 3.25 percent flat tax to the current graduated rate when the recent 21-percent tax cut is fully phased in by the General Assembly, a time-frame which would be accelerated under current legislation. The Washington-based institute is frequently cited by Citizens for Tax Justice, which has linked corporate welfare and tax cuts for the wealthy to the ballooning federal deficit, and was used extensively during the 2001 congressional session to evaluate President Bush’s tax plan.

“Overall, 61 percent of Ohio tax-filers would pay more in state income taxes if this flat-tax proposal were enacted, while only 16 percent would pay less. The remainder would see no change in their income-tax liability,” said the ITEP report, citing diminishing returns from a single-tax system over time. “A flat-rate 3.25 percent tax will benefit fewer and fewer Ohioans as the already-enacted income tax cuts continue to phase in.”

Policy Matters provided the following table to compare the apparent impact of Blackwell’s proposal on various income brackets last year:

The state would not only lose a half billion dollars in revenue under the Blackwell flat tax, noted ITEP, Ohio taxpayers would actually receive less than half the purported benefit. That is because lower state taxes would cost Ohioans $272 million in write-offs on their federal returns to the IRS, the report said.

The secretary of state has focused more on the substantial tax credit poorer citizens would enjoy under the plan. Aside from contrasting interpretations of ‘middle income’ in the ITEP and Blackwell analyses, the latter has offered a different calculation of its impact, saying families in the $30,000 bracket would receive a 0.05 percent cut under the flat tax.

Like currently scheduled tax cuts, it would be some time before the single-tax system produced its intended result. Neither low-income or middle-income Ohioans, however they are defined, would see the real effect of a 3.25 percent flat tax until four years into the plan.

Gongwer News Service

Republican gubernatorial candidate Ken Blackwell would take steps that reduce Ohioans’ tax burdens by $1.2 billion within 100 days of his swearing-in as governor, his campaign said Tuesday.

Mr. Blackwell said the move, which also includes eliminating the income tax burden on Ohioans who earn less than $20,000 per year, would help get the state out of economic stagnation.

“Our high taxes chase away good paying jobs and opportunities,” the Republican said in a campaign statement. “As governor, I will cut taxes and create an environment that will bring jobs and prosperity back to our state.”

The proposal would eliminate four of the state’s nine income tax brackets in an effort to move toward a single rate of 3.25%, according to the campaign. Those currently paying less than that amount would see their rates frozen.

Mr. Blackwell’s plan comes a day before his debate with Democrat Ted Strickland and a day following the release of a Policy Matters Ohio study critical of a flatter tax system.

The study indicating that a move to a flat, 3.25% tax rate would increase taxes on most Ohioans and would cost the state about $500 million in annual revenue. The report notes the state’s wealthiest residents would benefit the most financially under such a plan.

As part of the package, Mr. Blackwell said he would lawmakers to implement a pending 21% income tax rate cut in three years, rather than five. Lawmakers are currently considering legislation (HB 626) that cuts implementation time from five to four years.

Eliminating income tax payments for the state’s lowest-earning residents would remove an estimated 900,000 working poor from the tax rolls, the campaign said.

The Blackwell campaign said the state would pay for the tax cuts through a statutory limitation on state spending, cuts in Medicaid program expenditures and economic growth.

Canton Repository

By G. Patrick Kelley

Should the minimum wage be higher than $5.15? State Issue 2 would raise it to $6.85. Labor, community and religious organizations back the raise.

But a host of business organizations say the proposed constitutional amendment could cause job losses, and it carries some dangerous fine print that has nothing to do with the minimum wage.

John McGough, spokesman for Ohioans to Protect Personal Privacy, a campaign organization created to oppose the minimum wage amendment, said the businesses and organizations in the coalition are divided over raising the wage.

But the group’s research shows that less than 10 percent of the affected workers are the sole earner of a family with one or
more children, but the wage hike could cost 12,000 jobs for those people, McGough said.

Many are teens

About two-thirds of minimum wage earners are younger than 24, almost half still live with their parents and 40 percent are teenagers, he said.

The average annual income for homes with a minimum wage worker is $52,000 because so many of them are teens and younger workers who live with their parents, he said.

Another problem is that the minimum wage would be tied to the consumer price index, and rise with it, McGough said.

If that index should skyrocket like it did in the 1980s, there is no quick fix for a constitutional amendment.

Increasing the federal Earned Income Tax Credit — which provides money to low-earning heads of households — would be a better solution, McGough said.

The opposition agrees — partially — with that idea.

A good argument

“That’s definitely one of the arguments that we like,” said John Burton, an economist with the Center for American Progress, a nonpartisan research and educational institute. The center and Policy Matters Ohio, another non-profit research institute, say Ohio businesses can well afford to pay a higher minimum wage.

But raising the tax credit isn’t enough, he said. It should be tied to higher wages. He said the numbers of people applying for the tax credit show that there a “significantly” more than 10 percent of the affected workers are head of households.

Burton said the center’s research found that states with higher minimum wages experienced higher growth by small businesses.

Young and poor

Ohio minimum wage earners are divided into two groups, he said. One is “very young” people, but the other is of greater concern. “People who are locked into poverty.” At least 300,000 children in the state have at least one parent who would benefit from the increase, Burton said.

Amy Hanauer of Policy Matters Ohio said the state has experienced high growth in productivity, retail sector profits, corporate profits and CEO salaries, but pay for the middle class has stagnated, and minimum wage earners have lost ground to inflation.

“We found that states with higher minimum wages show higher productivity,” she said.

The second issue that the business coalition is united about is the records-keeping requirements of the amendment. It would require businesses to retain daily work records for every employee until three years after the last day of work.

Hanauer said companies already have to retain records for three years, but McGough said that’s oversimplifying. Federal law does require some records to be kept for hourly employees, but the amendment would require more records be kept for every employee, he said.

No charge

Another headache is that copies of the records must be given to the employees or former employees free of charge, as many times as requested, he said. But even more sensitive is that the amendment says the records also must be furnished to “a person acting on behalf of an employee upon request.” McGough said that could lead to unauthorized people gaining access to information, such as addresses and Social Security numbers.

“Those claims are patently false,” Hanauer said. People with access to the records would be “my attorney, my spouse” and in the case of a minor, “my parent.”

McGough said the amendment has no specification as to who can request the information.

Hanauer said the intent of that is to cut down on litigation, because to get those records now, former employees often have to sue. Companies would only have problems with those records “if you’re not paying the minimum wage,” she said.