Income-tax cuts approved last year would be phased in more quickly and Ohioans earning $20,000 or less a year would no longer pay income tax under a plan announced yesterday by Republican gubernatorial candidate J. Kenneth Blackwell.

Blackwell said his plan, which includes moving toward a flat tax, would immediately remove nearly 900,000 individual filers from the tax rolls and eventually mean $1.2 billion a year in income-tax cuts for individuals and companies.

With the candidates for governor poised to debate on the economy tonight in Cincinnati, Blackwell argued that his plan would help stimulate the state’s moribund economy by encouraging business growth and job creation.

But Democrat Ted Strickland and other critics say it would benefit primarily the wealthy and rob the state treasury of funds for needed services.

Blackwell said that during his first 100 days in office, he would push to phase in over three years the 21 percent income-tax cut the legislature had spread out over five years.

The legislature also approved giving credits to those earning $10,000 or less a year so they don’t pay income tax. Blackwell would double that threshold.

Based on 2004 returns filed last year, Blackwell’s change would remove an additional 879,703 filers who paid $113.7 million in taxes, state tax data show.

Ohio uses a graduated income-tax system with nine tax brackets of increasing rates, based on income. That system produced $8.8 billion in 2004.

Blackwell wants to remove four tax brackets as a step toward enacting a single-rate tax system in several years, with a target rate of 3.25 percent.

To address concerns about the tax burden shifting to the middle class as a result, Blackwell said Ohioans currently paying less than 3.25 percent would receive an income-tax rate freeze and keep their current deductions.

He also said that about 300,000 small-business owners pay the state’s income tax instead of business taxes, so the tax cuts would help them, too.

"Our high taxes chase away good-paying jobs and opportunities," Blackwell said in a news release.

Strickland said Blackwell’s plan is a gimmick.

Keith Dailey, campaign spokesman for Strickland, said, "Mr. Blackwell’s plan lacks one key ingredient: credibility. This proposal just doesn’t add up."

Blackwell argues that the lost revenue from the tax cuts he proposes would be offset by the 3.5 percent cap on the annual increase in state government spending enacted by the legislature this year and by savings from reforming the state’s Medicaid program. Strickland isn’t buying that, either.

"Mr. Blackwell talks about using Medicaid savings that he’s already spent in his education plan," Dailey said. "It’s laughable that he suggests using a spending cap that limits spending but does not produce savings."

Blackwell also argues that lowering taxes will stimulate business activity that, in turn, will produce more tax revenue. But critics such as Zach Schiller, of Policy Matters Ohio, say that’s a flawed analysis and that Blackwell’s proposal raises many unanswered questions.

Dispatch Senior Editor Joe Hallett contributed to this story.

mniquette@dispatch.com

Columbus Dispatch  10/04/2006

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