OHIO Counties fear 'tax holiday'

Some officials don't think it will stimulate the economy.
By JEFF ORTEGA
VINDICATOR CORRESPONDENT
COLUMBUS -- Advocates for Ohio's counties are watching closely a House-passed plan to suspend the state sales tax for two days in January, a move they say could have a serious impact on counties that depend on a portion of those tax receipts.
"County sales taxes are a significant source of revenue in the counties that levy them," said John R. Leutz, a policy analyst with the County Commissioners Association of Ohio.
Officials with the association say they will oppose a proposal for a "sales-tax holiday" as the Senate now considers the measure.
"We do not feel that this will stimulate the economy, but may have the effect of delaying purchases or some consumer durable goods until next year," Larry Long, association executive director, said in a memo to county officials throughout Ohio.
Closing shortfall: In addition to a plan to close a projected $1.5 billion shortfall in the two-year approximately $45 billion state budget, House Republicans inserted provisions to suspend the sales tax as a two-day "sales-tax holiday" to try to draw consumers back to the shopping malls.
Originally planned for December, the proposed tax holiday would be in late January if it passes. House Republican leaders estimate the proposed holiday would cost the government $27 million in forgone revenue.
The House plan, which resembles a plan offered by Republican Gov. Bob Taft, also relies on budget cuts, the closing of certain business tax loopholes and money from the state's approximately $1 billion budget stabilization fund or "rainy day fund." The House plan also borrows money from Ohio's share of the national tobacco settlement.
On top: The state sales tax is 5 percent. Counties and transit authorities can levy an additional tax on top of that up to 1.5 percent in quarter-percent increments, said Gary Gudmundson, a spokesman for the Ohio Department of Taxation.
The taxation department said that of the $7.6 billion generated by the sales tax in Ohio in the fiscal year that ended in June, counties and transit authorities collected $1.3 billion, and the state collected $6.2 billion.
"Not all counties levy sales taxes," Leutz said. "Some levy at different rates for different purposes."
Some counties use the sales tax to help fund mass transit; others use it to fund pro sports stadiums or for general county operations.
The "sales-tax holiday" idea is meeting mixed reaction among the senators on the Senate Finance and Financial Institutions Committee that's considering the budget package. The committee is expected to resume hearings on the proposed budget package Wednesday.
State Sen. Bill M. Harris, an Ashland County Republican who's vice chairman of the finance panel, said the idea might have some merit.
"It appears to be a good option," said Harris. "I think we're trying to get more information."
State Sen. Ron Amstutz, a Wooster Republican who sits on the finance committee, said he had questions about the proposal.
"I'm still skeptical that's the best thing to be doing," Amstutz said. "I haven't ruled it out. I'm not sure that gets the leverage we're looking for."
Taft's own plan: Taft appears to be lukewarm to the idea of a sales-tax holiday, saying he wants to advocate for his own plan, which has budget cuts, closing of loopholes, use of rainy-day and tobacco settlement money.
In a recent letter to Taft, House Speaker Larry Householder, R-Glenford, said the sales-tax holiday proposal is important to Republican House members.
"If the sales tax holiday for Ohio consumers is removed from the bill, it will fail to have the support necessary to gain passage through our chamber ...," Householder's letter said.
Harris said he thinks many Senate Republicans are against any budget package that uses a lot of the state's rainy-day fund.
Both the House Republicans' and Gov. Taft's budget plan would use $279 million of the fund, an amount Harris said many Senate Republicans might find objectionable.
"Every penny you take out now, if it's really raining that much harder in June, where do you find the money?" Harris asked.