Kasich’s plan would guarantee a 10 percent growth in sales tax revenues for counties and local transit authorities in 2013 and 2014, and a guaranteed 15 percent growth in 2015.
The new revenue is backed by a state funding guarantee, to be underwritten by the increased sales tax collections expected to result from newly taxing a variety of services that had previously been tax-free. Some previously exempt services that would be subject to sales taxes include cable TV, haircuts and legal services.
Meanwhile, the broadening of the tax base would be accompanied by a half-percent cut in the statewide sales tax rate. That’s in addition to a further reduction in local sales tax rates proposed by Kasich that varies county by county.
County commissioners statewide are encouraged by the prospect of additional funding, but concerned about the implications of other elements of the plan, including a loss of local control, said Larry Long, executive director of the County Commissioners Association of Ohio.
The new funding would likely not make up for recent state cuts, Long said.
“Frankly, there’s more unanswered questions before we come to a definitive answer on this one,” Long said.
The Ohio House finance committee began hearing testimony on Kasich’s proposed budget this week. The plan also includes an $13 billion expansion of Medicaid, an overhaul of Ohio’s school funding formula, a 50 percent income tax cut for small businesses, and income tax cuts for all of Ohio’s tax brackets.
Sales taxes are a key source — and in often cases the largest source — of revenue for county governments across the state.
A big concern about Kasich’s sales tax plan from county governments is a three-year moratorium on changing local sales tax rates that’s included Kasich’s sales tax plan, Long said.
Montgomery County shoppers would see a total 0.9 percent cut in their sales tax rate, the second-biggest cut in the Miami Valley. That’s because Kasich’s plan would cut both the Montgomery County tax rate by 0.25 percent, as well as an additional 0.15 percent cut to the sales tax imposed by the Greater Dayton Regional Transit Authority.
But due to the funding guarantee from the state, Montgomery County would collect at least $6.8 million in new sales tax revenues, while the Dayton RTA would get another $3.4 million, according to the governor’s office.
While they praised Kasich’s decision to expand Medicaid, county officials otherwise declined to weigh in on how the governor’s plan will affect their finances, saying they are still weighing all the factors, Montgomery County Administrator Joe Tuss said in an email.
Meanwhile, Dayton RTA chief financial officer Mary Stanforth was optimistic. She called the preliminary information about the funding increase they would receive under Kasich’s budget “positive news.”
The Dayton RTA receives more than half of its funding from sales tax collections.
“We would certainly like to see growth in the 10 percent range,” Stanforth said. “This would give us more stability, and we could consider restoring some service cuts we’ve made in the past.”
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