Better bank tax
Posted April 23, 2012 in Press Releases
Gov. John Kasich’s budget package includes a proposal for a new tax on Ohio financial institutions. It would replace current state levies on banks, savings institutions, securities and mortgage brokers, and payday lenders.
State officials say the plan would eliminate loopholes that enable some banks to avoid paying tens of millions of dollars in taxes each year. That’s appealing.
But instead of using revenue from the new tax to begin to restore drastic cuts in state aid to public schools, local governments, and essential state services, Mr. Kasich would redistribute that money to banks that don’t need it, in the form of lower tax rates. As Ohio’s recession grinds on, those priorities are askew.
Banks, savings institutions, and related companies now pay Ohio’s corporate franchise tax, assessed at 1.3 percent of net worth. Securities and mortgage brokers, payday lenders, and finance companies pay a different, 0.8 percent tax.
The governor’s proposal would tax all financial institutions at the same rate. It would raise a projected $225 million a year, roughly the same amount of revenue as the taxes it would replace.
The overall tax rate for banks would drop from 1.3 percent to 0.8 percent. The state’s largest dozen or so banks and other financial institutions, in addition to benefiting from that rate cut, would qualify for an additional reduction based on the amount of their “equity capital” in Ohio as measured by gross receipts.
The nonpartisan research and advocacy group Policy Matters Ohio contends that cutting taxes on banks is not likely to stimulate new lending and boost the state economy