Budget may hurt Ohio’s economy

Published 10:09 am Thursday, February 7, 2013

Gov. John Kasich’s proposed two-year budget includes many positive changes for Ohio, but the claims it would benefit every business and doesn’t raise taxes simply aren’t true.

The governor’s plan includes some sweeping reforms that are being touted as a way of creating jobs and boosting the economy, but it may in fact do just the opposite.

Of course, the plan isn’t all bad.

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An expansion of Medicaid that would benefit 365,000 more Ohioans makes perfect sense. Tying higher education funding to results rather than simply getting students through the door will be a welcome change. Adding an additional $1.2 billion to public school funding to level the playing field between the state’s wealthiest and poorest districts has been needed for more than a decade.

But the flaws lie within the tax changes.

The governor’s plan hopes to reduce small business taxes by 50 percent, cut the state income tax by 20 percent over the next three years as well as decrease the sales tax from 5.5 percent to five.

All these sound good, but the governor will pay for these cuts at the expense of many Ohio businesses.

Kasich’s proposal would require industries that only provide services instead of taxable goods to immediately start paying 5 percent sales tax.

This includes legal and accounting services, engineering and design services, insurance-related industries, advertising services and other industries that have never been subject to sales tax.

Implementing what amounts to a new tax on thousands of Ohio businesses will almost certainly force layoffs in the private sector, stifle job creation and force most industries to pass these increases on to the consumers. It will likely increase the cost of living for millions of Ohioans.

Kasich is smart to look at Ohio’s tax structure but attacking it with massive overnight changes will be a short-term fix that costs jobs in the end.