Sales taxes could be applied to …
This is list of some of the items currently exempted by the state sales tax that would be taxed at 5% under Gov. John Kasich’s proposed budget.
Agricultural Services
Horse boarding
Pet grooming
Industrial and mining services
Metal, nonmetal and coal mining services
Seismograph and geophysical services
Finance, Insurance and real estate
Service charges of banking institutions
Insurance services
Investment counseling
Loan broker fees
Property sales agents
Real estate management fees
Real estate title abstract services
Tickertape reporting
Personal services
Accounting
Cutting, coloring, styling of hair
Dating services
Debt counseling
Funeral services
Fishing and hunting guide services
Laundry and dry cleaning services
Mailbox rentals
Tax return preparation
Travel agent services
Business services
Billboard, radio, television, newspaper and magazine advertising
Advertising agency fees
Architectural services
Bail bond fees
Check and debt collection
Commercial art and graphic design
Credit information
Interior design and decorating
Lobbying and consulting
Magazine subscriptions
Marketing
Packing and crating
Process server fees
Public relations
Secretarial and court reporting
Telemarketing services on contract
Telephone answering service
Test laboratories (excluding medical)
Computer
Software-modifications to pre-written program
Software-custom programs-programming
Computer online services
Books-downloaded
Music-downloaded
Movies/video-downloaded
Other electronic goods-downloaded
Admissions and amusements
Pari-mutuel racing events
Amusement park admission and rides
Billiard parlors
Bowling alleys
Cable TV
Circuses and fairs
Coin operated video games
Admission to school and college sporting events
Admission to cultural events
Pinball and other mechanical amusements
Admission to professional sports events
Rental of films and tapes by theaters
Professional services
Accounting
Architects
Attorneys
Credit rating services
Engineers
Land surveying
Sound recording
Other
Parking lots
Trailer parks - overnight
Source: Ohio Department of Taxation
Ohio Gov. John Kasich will be in Dayton on Thursday to have a panel discussion with small business owners and economic policy experts about his plan to cut income and sales tax rates.
The event will be at Early Express, a printing business at 1333 E. Second Street.
Sales taxes would be collected on nearly everything Ohioans purchase, from professional sports tickets to tax preparation to a play on a pinball machine under the budget plan Kasich unveiled this week.
Kasich wants to widen the net on what’s taxed while lowering the state sales tax rate from 5.5 to 5 percent and raise taxes on oil and gas extracted from Ohio soil to help trigger state income tax cuts. Under the plan, sales tax revenue would grow $3 billion through June 2015 and make up the largest portion — about one-third — of the state general operating budget.
Kasich’s plan promises $1.4 billion in tax cuts over the next two years, but it’s unclear whether those savings would land in the pocketbooks of average Ohioans. Ohioans would pay less sales tax on goods and services they already buy, but pay new taxes on dozens of added goods and services.
Several of these make up a household’s monthly budget: cable television, laundry services and haircuts. Most goods and services related to education, healthcare and housing would remain exempt from the tax.
Sales tax is applied at the time the sale is made, which puts the burden of payment on vendors. Vendors must pay the tax, even if it is not factored into what the customer pays. In most cases, however, the tax will be paid by the consumer at the time of sale.
The proposed 20 percent across-the-board income tax cut would be phased in over three years. Eventually, taxpayers in the highest of Ohio’s nine brackets, who earn more than $206,250 a year, would pay a 4.74 percent marginal rate, down from 5.925 percent. Taxpayers in the middle bracket, who earn between $20,650 and $41,250, would pay 2.817 percent, down from 3.521 percent.
Zach Shiller, research director at left-leaning Ohio think tank Policy Matters Ohio, said expanding the sales tax will hit lower and middle income people more because a larger share of their income goes toward those taxes.
The lowest 20 percent of Ohioans pay about 6.7 percent of their household income on those taxes compared to about 1 percent for the state’s top 1 percent, according to a recent study by the Institute on Taxation and Economic Policy, a D.C.-based nonpartisan, nonprofit think tank.
Schiller said professional services and goods such as digital downloads should be taxed, but the state should account for the disparity between low- and high-income with refundable tax credits.
“This is basically broadening the sales tax in order to give away income tax cuts that are mostly going to benefit affluent people,” Schiller said.
Whether the tax burden increases or not depends on an individual’s income and what they consume. Gary Gudmundson, spokesman for the Ohio Department of Taxation, said some businesses might choose to eat the cost of the 5 percent tax. The proposal would tax pinball games, coin-operated washers and dryers and other small-cost items that would be difficult to add a tax at the time of sale.
Kasich pledged on the campaign trail to eliminate Ohio’s income tax, which he says prevents businesses from moving to Ohio and growing. The proposal he presented Monday would move Ohio five places down on the list of highest state individual income taxes, from 31st highest rate to 36th, according to budget documents.
Tim Keen, director of the Ohio Office of Budget and Management, told lawmakers on Tuesday the tax changes are intended to drive down tax rates to return more dollars to small businesses filing as individuals. Keen said businesses can use the money to employ more Ohioans or expand their businesses.
“Capital investment matters; capital investment drives jobs,” Keen said. “Taxation that punishes income is a disincentive for investment in the state of Ohio.”
Income and sales taxes made up about 30 and 29 percent, respectively, of the state’s general revenue fund in Kasich’s 2012-13 budget. Lowering income tax rates would reduce revenues $1.66 billion in fiscal year 2014 and $2.67 billion in fiscal year 2015, according to the Kasich administration’s projections.
Democrats on Tuesday questioned whether businesses invest savings from an income tax cut or pocket it and said the five-year, 21 percent income tax cut that began in 2005 did not produce robust economic growth.
“These reforms were supposed to create jobs,” said Rep. Denise Driehaus, D-Cincinnati. “If the small business owners are not behaving in a way that makes this work I’m not sure how we expect them to do it differently in the future.”
An earlier version of this story listed residential utilities to be taxed under Kasich’s plan. Documents released late Tuesday night by the Ohio Department of Taxation keeps those utilities exempt under the proposal.
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