Ohio tax breaks: $9.8 billion and growing
Posted September 05, 2019 in Press Releases
In the final year of the new state budget, Ohio will forgo $9.8 billion in estimated tax revenue due to tax breaks legislators have created. That amounts to more than state dollars spent on human services like child care and aid to people with disabilities, according to a new report by Policy Matters Ohio.
Tax expenditures – also known as tax breaks or loopholes – lower tax liability for a person, business or other entity. Some help many people, like a sales tax break for prescription drugs, but many are narrowly focused and benefit only special interests, like the sales tax break for wealthy buyers of timeshares in jet aircraft. Lawmakers will allow the 134 tax breaks in the tax code to grow by $1.3 billion in the 2020-21 biennium compared to the prior, two-year budget period. Between 2012 and 2021, the amount of forgone revenue grew by 18%, adjusted for inflation.
“Ohio’s tax code is upside-down and full of holes,” said Policy Matters Senior Project Director Wendy Patton. “The wealthiest pay less as a share of income than Ohioans with the lowest-incomes. If they closed some of these loopholes, legislators could make our tax code more fair and also generate a lot of revenue for important things like public education.”
Legislators considered creating, repealing or changing 27 tax break measures in the budget bill for 2020-21. They could have saved more than $580 million in 2021 had they reduced the $1 billion small business income deduction known as the LLC Loophole; repealed the motion picture tax credit; and put a cap on sales tax paid by wealthy buyers of timeshares in jet aircraft.
The General Assembly could consider 24 additional tax break proposals this fall. Given the huge size and rapid growth of spending through the tax code, lawmakers should carefully review and monitor each tax break to make sure it is efficient, effective, and accomplishes what it was created to do. In 2016, both houses of the General Assembly unanimously voted to create the Tax Expenditure Review Committee (TERC). The committee is supposed to provide better oversight of Ohio’s tax breaks, but it’s not properly funded or staffed. TERC met just three times during the 2018-19 biennium, giving but a cursory look at 15 tax breaks totaling $5.7 billion in annual state and local revenues forgone and recommended they all continue without modification. Some committee members asked the General Assembly to provide it with additional funding for staffing, but lawmakers left that out of the 2020-2021 state budget.
“With so much money on the line and with so many important services underfunded, there is a clear need for regular oversight of tax expenditures,” Patton said. “The people of Ohio deserve careful review of how their elected leaders are spending their resources.”