Last of Ohio tax cuts rolls in today

TOLEDO (AP) — The last in a series of personal income tax cuts will take effect today even as Ohio deals with a bleak economic outlook that could force the state to close state parks and cut funding for schools.

The 21 percent tax cut for both individuals and most small businesses was designed to create jobs when it was approved in 2005.

That means a family of four with two people grossing $60,000 a year and filing jointly will see their state taxes next year drop by $435 when comparing it with five years ago, according to the Ohio Department of Taxation.

The final phased-in cut starting today is 4.2 percent, saving that same family about $85 next year compared with this year.

Gov. Ted Strickland has said he has no intention of doing away with the tax cut even though the state is facing a possible $7.3 billion budget shortfall and deep spending cuts in the next two years.

Rolling back the tax cut would do more harm, Strickland said.

Republican leaders in 2005 passed a package that included the reduction in the state’s income tax over five years and phased out the state corporate franchise tax.

Outgoing House Speaker Jon Husted, R-Kettering, said the tax cut could help stimulate the economy.

“For the small businesses that get those breaks, that may be the difference between laying somebody off and not laying somebody off,” he said.

It also sends a message that Ohio is a good place to start a business, he said. “It’s the states that can hold the line in that respect that will be the ones that prosper in the long run,” Husted said.

Still, some think cutting how much revenue the state brings doesn’t make sense now.

The cuts will take away an estimated $450 million in revenue in 2010 and $468 million in 2011.

The state would be better off to maintain its spending levels at a time when jobs continue to disappear, said Zach Schiller, research director for Policy Matters Ohio, a Cleveland-based liberal think tank.

State revenue has dropped each of the past three years since 2006, and Ohio could end up collecting less revenue in 2011 than it did in 2004.