Tax cuts, pressure on local government undermine positive aspects of Kasich plan

- March 28, 2013
   
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New analysis highlights modest restoration, Medicaid expansion

The Kasich administration’s budget proposal continues damaging trends started with the current budget, including tax cuts and a failure to restore local government revenues, according to a new overview by Policy Matters Ohio. But it also contains positive elements, most notably new investment in health care through a Medicaid expansion and increases in state funding for some services.

“The windfall from Medicaid expansion, the slightly improved economy, and the state’s continued use of funds historically shared with local governments and schools all help fund a modest restoration under this proposal,” said Wendy Patton, senior project director for Policy Matters. “But too much of the new money is being directed to income tax cuts that go primarily to the wealthiest.”

The proposal boosts state coffers with $2 billion that historically had been directed to local governments, schools and libraries. At the same time, the administration’s tax proposals would take about a billion dollars out of state revenues while making the state tax structure less equitable, according to the analysis. Broadening the sales tax base is a sound way of strengthening and stabilizing the tax, but the move hurts low-income families more than others. Combining income tax cuts with the sales tax changes means that Ohio’s top 1 percent of earners would get a net cut of more than $10,000 annually, while earners in the bottom fifth would pay on average $63 more each year.

“This makes our tax system less fair,” said Patton. “We recommend retaining the current income tax level and adding a state earned income tax credit and a sales tax credit, to offset the sales tax hike for low- and middle-income households.”

The budget overview examines a number of areas, including health and human services, Medicaid, education and local government.

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Policy Matters Ohio is a nonprofit, nonpartisan state policy research institute

with offices in Cleveland and Columbus.

 

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