It’s often said that no one likes paying taxes, but what’s frequently left unsaid is that taxes are a necessity if government is to function.
Which is why Ohioans should be worried about a pair of bills introduced by Republican lawmakers in Columbus to phase out the state income tax over the next six years.
Last year, the state collected about $13 billion from income taxes and the commercial activity tax, or CAT tax, which Republicans also want gone.
As state Rep. Joe Miller, D-Amherst, correctly pointed out to us, lawmakers have been “nibbling away” at the state income tax for years, including in the budget passed last year.
Miller also was rightly concerned about the impact on state revenue if either of the plans to eliminate the income tax became law, a long-term GOP goal. (The House and Senate versions would operate slightly differently, but the end result is the same.)
Republicans have yet to fully explain how they would deal with the lost revenue, although cuts to government services and increases in other taxes, such as the state sales tax, are very real possibilities.
Neither of those are good options.
Cuts could eliminate vital services that folks expect or even rely on their state government to provide.
A sales-tax hike would be regressive, hitting those least able to afford it the hardest. The same would apply if the state were to greatly increase fees for services.
Then there’s idea, popular among conservatives, that lower taxes would spur a surge in economic growth, offsetting whatever losses would be created by nixing state income taxes.
“Eliminating the state income tax will change the lives of Ohioans for the better,” state Rep. Brian Lampton, R-Beavercreek, said in a news release. “Our goal is to make Ohio the best place to work, live, and raise a family.”
State Sen. George Lang, R-West Chester, predicted that the tax cuts would cause Ohio’s economy to grow from about $750 billion to $1 trillion by 2030, the Statehouse News Bureau reported.
That would be great if it happened, but that’s a big if.
Then-Kansas Gov. Sam Brownback, a Republican, made similar promises of booming economic growth when his state began implementing of drastic tax cuts in 2012.
It didn’t work out that way. State revenue fell precipitously over the next few years, which led to cuts in government service and credit downgrades, among other problems. In 2017, the state legislature reversed the tax cuts.
Lang dismissed the failed “Kansas experiment,” as it was known, by pointing out that the Sunflower State didn’t have Ohio’s natural gas resources, according to the Statehouse News Bureau.
Closer to home, Ohioans saw what happened when state income taxes were reduced during the tenure of former Gov. John Kasich, a Republican. Among the ways the state dealt with reduced income-tax revenue was to raise the state sales tax and reduce the amount of money it was sending to local governments, many of which raised local taxes to make up for the losses.
If the state were to again reduce the money it sends to municipalities, libraries and other entities, local governments might need to ask voters to raise taxes locally to make up for shortfalls.
Those efforts could be complicated by an unrelated bill that would prevent local governments from asking voters to replace rather than renew property tax levies. Renewals are fairly straightforward and don’t increase taxes, but replacements take into account present day property valuations, allowing more taxes to be collected.
Republicans in favor of that bill have argued that voters have a difficult time telling the difference between renewals and replacements. If that truly is a problem, the better option would be to change what replacement levies are called rather than limiting the options of local governments.
State Sen. Nathan Manning, R-North Ridgeville, who sits on the Senate Finance Committee, told us he hadn’t fully reviewed the income-tax elimination proposals, although he said he favored lowering the tax burden on Ohioans.
He said he liked the gradual approach the proposals would take because they would allow the state to change course if there were budget problems or the economy went south.
State Rep. Gayle Manning, R-North Ridgeville, likewise was open to the idea of gradually reducing state income taxes, although she said she was mindful of the risks of cutting services that people depend on.
State Rep. Dick Stein, R-Norwalk, told us that while he generally supports reducing or even eliminating the state income tax, he hasn’t looked at the current proposals enough to form an opinion on their feasibility.
“I’m supportive of the concept,” he said. “But obviously the devil’s in the details.”
Stein was, however, skeptical that the General Assembly would be able to act on either proposal this year given the impact of elections on the legislative calendar.
Even if Republicans don’t succeed this year, their dream of eliminating the state income tax won’t go away.
Nor will the need to fund state government.
