Kasich defends plan to slash income tax
Toledo Blade - March 20, 2012
DUBLIN, Ohio — As Micah Hetrick, of Dublin, who is developmentally disabled, proudly boasted Monday of his job and paycheck, Gov. John Kasich quipped, “We’re trying to cut his taxes.”
The remark drew laughs at Dublin Methodist Hospital, where the governor promoted a plan to employ people with development disabilities in mainstream settings, but Mr. Kasich was very serious. The governor has been surprised to find himself locked in a battle with an unlikely foe, fellow Republicans in the General Assembly, in his effort to expand a tax on the extraction of oil and natural gas liquids to underwrite a dollar-for-dollar personal income tax cut for all Ohioans and small businesses.
“I’m not going away, and I’m not going to take no for an answer,” Mr. Kasich said after the Dublin event. “The taxpayers deserve better than that. We’ll get there. Some of it may be people didn’t have all the information.”
He hopes that taxpayers in general and the business community will rally behind his plan to change the minds of legislative Republicans.
Conservatives, however, appear to be rallying around Republican leaders who plan to strip language applying to severance and income taxes from a midbudget review bill up for a hearing before the House Finance and Appropriations Committee on Tuesday.
Americans for Prosperity in Ohio has urged lawmakers to split the difference — kill the plan to expand the severance tax but proceed with an income tax cut funded by more cuts to local governments.
“As Ohioans’ elected leaders campaigned on reduced spending and taxes, this is a perfect time to encourage energy exploration, cut spending, and cut taxes on families,” said Seth Morgan, the organization’s policy director and a former Dayton-area state representative.
“The governor and legislative leaders can do all of the above, and they should,” he said.
The Ohio Liberty Council, the closest thing to a statewide Tea Party organization, is also backing the decision to shelve the plan.
Many GOP lawmakers have signed pledges stating that they won’t raise taxes, and they consider expanding the 40-year-old severance tax to include liquids containing oil and natural gas extracted via hydraulic fracturing, or “fracking,” to be a tax increase. Hydraulic fracturing involves using fluids and chemicals at high pressure to fracture shale to release the gas and oil trapped within.
Mr. Kasich noted every penny derived from the expanded tax would be applied to an across-the-board income tax cut.
“We have an opportunity to move the cost on somebody else so we can lower our taxes,” he said. “I mean, it’s just the way it ought to be. We’re not proposing some of the highest taxes in the country. We’re proposing maybe the lowest in the country.
“It’s a net-net zero and a gain for Ohioans,” Mr. Kasich said. “We’re not raising taxes.”
Democrats, in the minority in both chambers, have not clamored to Mr. Kasich’s side to offer their votes to put his plan over the top if a few Republicans could be convinced to go along.
“[Senate Minority Leader Eric] Kearney is waiting for [House Speaker Bill] Batchelder and Kasich to call him. Not that he’s really expecting that to happen,” said Senate Democratic spokesman Mike Rowe.
House Democratic spokesman Keary McCarthy said that his caucus remembers the cuts to schools and local governments inflicted in the current budget.
“I can tell you some of our members want to use the potential revenue to rebuild our communities and protect our schools,” he said. “If we can do that, not only would we be in a better position to protect middle-class families, we would also be able to hold off increases in local property taxes.”
Zach Schiller, research director of the liberal think tank Policy Matters Ohio, said an across-the-board income tax cut would disproportionately favor the wealthy. He said an Ohioan earning $321,000 or more a year would see a tax cut of about $3,200 a year, compared to about $42 for someone earning between $32,000 and $49,000 a year.
“Governor Kasich said every Ohioan should benefit from the wealth in shale oil and gas, not just out-of-state shareholders in oil and gas companies,” he said. “Yet he proposed to give the money raised from a higher severance tax mostly to upper-income Ohioans. Instead, we all ought to benefit from better education and public services that otherwise are being cut in the current state budget.”
Mr. Kasich’s plan calls for high-volume horizontal wells during their first year of operation to be subject to a 1.5 percent tax on their sales of natural gas and crude oil liquids, a lower rate designed to help drillers recoup their start-up costs.
Then the tax would climb to 4 percent.
Taxes on small natural gas wells would be eliminated, and taxes on traditional natural gas high-volume horizontal wells would be cut. Ohio does not currently tax the type of liquids extracted from fracking and horizontal well operations.
Mr. Kasich was at the suburban Columbus hospital to promote his Employment First Initiative. That is another provision of the midbudget review plan he unveiled last week.
As Mr. Hetrick, 23, dotted the “i” in the governor’s name, Mr. Kasich signed an executive order to create a task force to expand options to employ people with development disabilities in mainstream settings to help them develop confidence and skills.
Mr. Hetrick is employed through the OhioHealth system.
It owns Dublin Methodist Hospital.