An important debate will heat up in Ohio early next year over the state’s tax policies and whether they are helping or hurting the economy.

The biennial spending plan Gov. John Kasich unveils for the state is expected to include a combination of tax reductions and spending cuts, a strategy the governor’s office credits for closing an $8 billion budget hole in the last two-year budget.

“We know what works,” said Rob Nichols, the governor’s press secretary.

But critics say Kasich’s policies, the broad outlines of which are taken from the longtime GOP playbook, aren’t working as advertised. They say the conservative tax policies contribute to income inequality and force cities and counties to shoulder greater tax burdens and diminish public programs like education and infrastructure improvements that have a greater impact on economic development.

Both arguments will come into play in the months following the release of the governor’s budget plan, scheduled for early February.

“It’s hugely significant,” Janetta King, president and chief executive of the left-leaning think tank Innovation Ohio, said of the upcoming budget. The spending blueprint will “kick off a very robust six-month debate on how Ohio should spend its resources,” she said.

The latest salvo came last week, as a think-tank report found states that follow the conservative principles outlined in the influential American Legislative Exchange Council’s annual ranking of the states for business-friendly practices actually have had worse economic outcomes in the last five years than those that don’t.

The study, “Selling Snake Oil To The States” by the nonprofit Iowa Policy Project and Good Jobs First, said ALEC’s policy prescriptions — lowered income taxes, the elimination of estate taxes, the existence of anti-union “right-to-work” laws — have no statistically significant impact on growth in jobs, gross domestic product or on per capita or median income.

The study looked at how well all 50 states performed economically over the last five years versus their ranking in ALEC’s first “Rich States, Poor States” report in 2007, authored by Arthur Laffer, an architect of Reaganomics in the 1980s. Ohio ranked 47th in the 2007 ALEC report for business-friendly policies. It ranked 37th in the 2012 edition.

But moving up in ALEC’s rankings isn’t necessarily a recipe for economic health, according to the “Selling Snake Oil To The States” study.

“The better you ranked on their measures, the worse you did on income,” said lead author and economist Peter Fisher, a professor emeritus at the University of Iowa who has served as a consultant to the state of Ohio. “Not a single component of ‘Rich States, Poor States’ index had an impact.”

Fisher’s report was released as ALEC convened its annual States & Nation Policy Summit in Washington, D.C., which concluded on Friday. ALEC said the summit would bring together hundreds of state legislators and business leaders “to discuss sound policy solutions focused on economic growth and fiscal responsibility.”

Started in 1973, ALEC counts among its members 2,000 state legislators from across the nation. The Center for Media and Democracy has identified 41 Ohio legislators, all but one of them Republicans, with ties to ALEC. State Sen. Bill Seitz, R-Cincinnati, is a national ALEC board member. And Kasich was involved in ALEC during its “formative years,” according to ALEC’s website.

The left-leaning Truthout news organization reported that Ohio legislators introduced 33 bills in 2011 “based on ALEC model legislation.” ALEC denied it was behind the controversial Senate Bill 5 legislation championed by Kasich that called for restricting the collective bargaining rights of public workers.

Greg Lawson, policy analyst for the conservative Buckeye Institute think tank, said policies pushed by ALEC are starting to show results in Ohio.

“Quite frankly, Ohio only started making the changes ALEC recommended in recent years,” he said. “It’s a little premature to be making some of these judgments until the policies are fully implemented. We’re only now beginning to see the impact.”

Nichols said the Kasich administration finds some of ALEC’s recommendations useful, but isn’t in the organization’s thrall. He dismissed Good Jobs First as a “left-wing group” that’s “largely irrelevant.”

“Ohio tried it their way and lost 400,000 jobs and blew an $8 billion hole in the budget,” he said. “Since we’ve taken office, Ohio’s added 125,000 jobs, our budget’s in balance and we’ve started to make Ohio more jobs-friendly.”

Others point to more of a mixed bag when examining the state’s economic health.

Ohio’s unemployment rate in October was 6.9 percent, a full percentage point below the national rate, according to the Bureau of Labor Statistics. But the Census Bureau reports that, at an estimated $44,648 in 2011, Ohio’s median income has been in decline since 2007 and lags behind the U.S. average of $50,054.

Innovation Ohio’s King said the presidential election proved that Ohioans don’t want the state’s tax policies to be used as an instrument to give breaks to large corporations and the wealthy.

“People are now demanding tax fairness,” she said.