“The governor can call this whatever he wants but he’s asking Ohioans to pay $844 million more today than they were obligated to pay yesterday. That’s a tax increase,” said Ohio GOP Chairman Kevin DeWine of Fairborn.
In 2005, lawmakers approved a 21 percent across-the-board income tax cut that was to be phased in over five years. The last 4.2 percent was to be phased in this year and Ohioans’ paychecks already reflect this in the amounts being withheld.
During budget talks, the Democrat governor repeatedly said he wouldn’t raise taxes in a down economy. But an adverse ruling last week by the Ohio Supreme Court made it impractical in this budget to try to generate tax revenue off slots.
“The budget is not in balance today. We need to act quickly,” Strickland said. “The choice is clear. We can cut education, raise taxes or postpone the last phase of the income tax reduction.”
While some taxpayers may notice a change, others might not. Last year, 3.9 million of the 5.3 million tax filers received refunds.
If lawmakers fail to adopt the tax cut freeze or come up with another solution, school districts will automatically see $851 million in cuts and possibly as much as $2.3 billion if Ohio can’t meet federal regulations for stimulus money.
The name calling started quickly.
State Sen. Tim Grendell, R-Chesterland, in a press release, said Strickland has now “flip-flopped” on taxes just as he flip-flopped on gambling in July.
The campaign for governor also has started. Rob Nichols, spokesman for Republican John Kasich, Strickland’s likely opponent next year, said the “state has been completely mismanaged for years and Ohioans are hurting.
“Our people and our jobs are leaving Ohio and to think that we can solve our problems by raising taxes on Ohio families and imposing additional barriers to businesses wanting to come to our state is unacceptable.”
Nichols offered no immediate alternative but said Kasich, a former U.S. House member from suburban Columbus, “would be sharing his vision for creating jobs and fixing our economy over the next 13 months.”
Strickland anticipated such criticism and at a news conference said, “Some will try to score political points by branding this delay as a tax increase. But, again, tax rates are staying the same as last year.”
Because most of the 21 percent income tax cut is already in place, a family of four making $60,000 a year is now paying $357 less in state income taxes than they paid in 2004. The additional 4.2 percent cut would have reduced it further.
Of immediate importance to the governor was the reaction from leaders of the Democrat-controlled House and Republican-controlled Senate; he’ll need their support to enact his budget-balancing plan.
Neither House Speaker Armond Budish, D-Beachwood, nor Senate President Bill Harris, R-Ashland, committed to Strickland’s plan but the governor’s biggest hurdle is expected to come in the Senate, which Republicans control 21-12.
Harris declined to say if he considered the plan a “tax increase” but did say a tax hike “would be the worst thing ... the way our economy is right now.”
Harris said “all issues have to be on the table and I’m not going to restrict our members.”
In the House, which Democrats control 53-46, Strickland and Budish should expect little Republican help.
“While families are struggling to make ends meet, a tax hike imposed by the governor would just add a bigger bill to the pile and create less efficient government,” House Minority Leader William Batchelder, R-Medina, said in a press release.
Batchelder said House Republicans offered proposals to save $3 billion by streamlining government that were ignored in putting the budget together.
Outside the legislature, the governor did get some support. Ohio State University President E. Gordon Gee said in a press release that Strickland “is taking decisive, responsible action...”
If lawmakers fail to adopt the tax cut freeze or come up with another solution, school districts will automatically see $851 million in cuts and possibly as much as $2.3 billion if Ohio can’t meet federal regulations for stimulus money.
“Without this option, the loss of state and federal dollars will force Ohio schools to slash vital academic programs and services such as transportation, staffing, and student activities,” said Patricia Frost-Brooks, president of the Ohio Education Association. “Ohio cannot turn the corner economically without a strong commitment to public education as the bridge to the careers and industries of the future.”
Meanwhile, Strickland said he plans to ask the courts for a ruling that will clarify whether the governor has the constitutional authority to put slot machines at racetracks via the Ohio Lottery. That question is central to two other lawsuits now pending before the Ohio Supreme Court.
Strickland said he is uncertain whether he would use that authority to raise money in subsequent budgets.
C. David Paragas, who represents track owners, said it appears Strickland isn’t closing the door on slots.
“We certainly aren’t walking away from the opportunity to put VLTs at the racetrack venues ... It just looks like it’ll take more time than anticipated,” he said.
Only two of the seven tracks turned a profit last year and Thistledown in Cleveland went into bankruptcy. Track owners have complained for years that they need slot machines if horse racing is going to survive in Ohio.
Gene Pierce of LetOhioVote.org, the group that won a ruling from the supreme court last week, said at this point his group is still pushing ahead with a referendum.
The group expects to have its petition language approved by Attorney General Richard Cordray by Friday, Oct. 2, and has hired JSM Inc. to begin collecting 241,366 signatures from registered Ohio voters by Dec. 20.
“We’re not backing off of anything until our lawyers tell us to back off of something,” Pierce said.
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