Gov. Kasich proposes tax changes

Published 10:05 am Tuesday, January 31, 2017

Opposition likely from own party

COLUMBUS (AP) — Ohioans would see a 17 percent income tax cut and a two-year college tuition freeze under a budget plan Gov. John Kasich said Monday balances investments that support Ohio’s economic stability while grappling with scarce state resources.

The Republican governor would pay for the programs in part through tax hikes on alcohol, tobacco products and gas drilling. He also would impose a half-percent increase in the state sales tax, from 5.75 percent to 6.25 percent, and extend it to additional services, including cable TV subscriptions, elective cosmetic surgery and lobbying.

The tax increases are likely to face opposition from Republican majorities in the state Legislature.

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Kasich said the $66.9 billion, two-year spending blueprint ensures “that we don’t send a message to the economic universe that we’re getting weak.”

“My No. 1 goal here is economic stability, fiscal stability,” Kasich said.

Covering the two years beginning July 1, the budget spends $4.3 billion less in state general revenue than the previous budget.

The administration bolsters its tax and spending proposals with a host of money-saving ideas. Those include the use of data analytics to help solve big problems like infant mortality, illiteracy and heroin addiction; streamlining business tax collections; giving more high-school and college credits for skills, competencies and apprenticeships; and bringing all state computers into the cloud by the time Kasich leaves office in two years.

The budget calls for modest additional spending for K-12 schools, higher education and prisons, while delivering flat funds or cuts to a number of other agencies. Infrastructure spending is increased by 20 percent, which Kasich said is remarkable considering the plan delivers a small net tax cut of $39 million. He said the 1-percent increase in primary and secondary education funding represents record spending, despite the modest percentage.

State Budget Director Tim Keen said reductions in state tax outlay shouldn’t be viewed in isolation. He noted that his office was able to use income from state offices that draw revenues from outside sources, such as fees or federal grants, to offset apparent general revenue cuts to some agencies.

Still, Keen described the budget as the toughest he’s ever had to write. He said it prioritizes education and protects Ohio’s most vulnerable citizens.

The two-year tuition freeze would be accompanied by a freeze on general fees and special fees at higher education institutions. The schools would be required to provide student textbooks by fall 2018, and could charge a $300 fee to cover part of the cost.

Balancing the budget relies on $200 million from a new monthly premium that would be charged to Medicaid beneficiaries who are childless, not pregnant and have an income level above the poverty level.

Last year, federal regulators rejected a plan that would have required more Medicaid beneficiaries to pay a monthly premium than the proposal rolled out Monday. The feds said that plan could have led to tens of thousands of low-income people losing health care coverage.

The administration said Monday the state will seek federal approval for its new premium plan, which would cap monthly premiums at 2 percent of household income. Premiums are estimated at about $20 a month. The budget plan also makes prescription-drug changes to Medicaid saving roughly $40 million.

Tax Commissioner Joe Testa said the proposed alcohol tax increase would amount to about a penny for a glass of beer or wine. He said it’s not been “modernized” since 1992.

“That was the year of ‘Silence of the Lambs,’ ‘My Cousin Vinnie’ and AmeriFlora,” he said.

Kasich’s plan would increase Ohio’s cigarette tax from $1.60 a pack to $2.25 a pack and raise taxes on other tobacco products by an equivalent rate. The bill also calls for making vapor products, including e-cigarettes, subject to the tax.

Kasich’s budget plan heads next to the Ohio House, which is set to begin deliberations in the coming days.