Ohio forced to raise tax to ride financial storm

The one-penny increase in Ohio's sales tax went into effect last week, and while it may pose a hardship for some, the overall impact won't be as devastating as critics contend. But what the tax increase does show, however, is that the national economy is still weak and recovery isn't around the corner -- despite what the Republican administration of President Bush might say.
Ohio isn't alone in being forced to find additional revenue to balance its operating budget. The $2 billion shortfall that Gov. Bob Taft and the General Assembly had to make up in the two-year budget that began Tuesday pales in comparison with the $30 billion deficit that California is confronting.
When the national economy staggers, the federal government begins the avalanche by cutting funding to states for mandated and nonmandated services. States, in turn, are forced to make their own cuts, and often the effects are felt by county and local governments.
There was no way Ohio could have addressed its fiscal problems without new revenue. Hundreds of millions of dollars in cuts had already been made, and yet the deficit continued to grow. Further cuts in agency budgets and other programs, such as education, would have been disastrous. Ohio must have the ability to compete in the global marketplace, and that cannot happen if colleges and universities are on the ropes and job-creation initiatives are undermined.
Tax structure
On the other hand, the latest fiscal crisis does demand an in-depth look at the state's overall economy, with special attention being paid to the tax structure. Are taxes too high or too low? How does Ohio compare with other Great Lakes states? Is there a need to impose a special tax for primary and secondary education so as to adhere the Supreme Court's opinion that the dependence on property taxes deprives all children of a thorough and efficient education?
There was some encouraging news last week when the administration announced that the budget had an unexpected boost of $180.7 million as a result of a spike in receipts from the sales and personal income taxes over what the Office of Management and Budget had projected. There also was an increase in federal dollars coming to Ohio and savings as a result of cuts made by agency directors on order of the governor.
To his credit, Taft immediately said the windfall should go into Ohio's rainy-day fund, which at one time boasted $1 billion but had been depleted in the last biennium.
The uncertainty of the economy demands continued discipline. Now is not the time for the state to go on a spending spree, even though there are agencies that could use additional funds.
As budget director Tom Johnson said in talking about the additional revenue, "From our perspective it's going to be a slower recovery than normal and there will be ups and downs."