Report: Tax Code Changes Could Loosen Ohio’s Budget Squeeze

Public News Service - October 6, 2008

By Mary Kuhlman and Chris Thomas

Public News Service

Cleveland, OH – As Ohio deals with a budget shortfall of nearly $2 billion, state agencies continue to cut back on services and projects to try to make up the difference. A new report finds that instead of cutting into the basics, lawmakers should take a closer look at the tax code. APolicy Matters Ohio study identifies a dozen tax breaks that get some of the blame for squeezing the budget.

Report author Zach Schiller, research director of Policy Matters Ohio, points out there are ways for the state to ease the shortfall.

“If the legislature limited or eliminated specific tax breaks, they would not only improve the fairness of the Ohio tax system but also generate up to $270 million of revenue annually.”

Critics of the report say tax breaks are designed to be economic drivers. While that may be true, says Schiller, their usefulness needs to be scrutinized periodically, to determine whether they bring solid returns. He also believes there likely are many parts of the state tax code that simply are no longer useful.

“Unfortunately, much of our tax code was written over a long period of time. Perhaps these rules had a useful purpose when they were first approved, maybe not, but once codified they rarely get any further scrutiny.”

The study recommends the elimination of special tax treatments for payday lenders and mortgage bankers, as well as limiting the availability of three property tax reduction programs to those with low to moderate incomes. The report also recommends that the state review the way it applies the sales tax code to services.

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