State mulls various tax scenarios

COLUMBUS (AP) — Combining a one-cent increase in the state sales tax with a delay in planned income tax reductions would essentially close Ohio’s $3.2 billion budget gap, according to rough estimates by the Ohio Department of Taxation.

This is one scenario Gov. Ted Strickland and Ohio lawmakers could use in trying to fix the hole in Ohio’s budget, should they turn to ways to raise revenue.

But Strickland, a Democrat, and lawmakers from both parties have continuously rebuffed any talk of tax increases, focusing instead on making up the gap between the two-year spending plan and expected revenue with cuts alone.

Advocates for programs ranging from early-childhood education to expanded children’s health insurance continue to cry out for tax hikes to be part of the solution to Ohio’s budget gap, which lawmakers are scrambling to close by July 1.

They said that social programs already have been cut drastically because of the state’s economic situation, and any further cuts will devastate the social safety net.

“These programs can’t be cut any further,” said Amy Swanson, executive director of Voices for Ohio’s Children. “Revenue enhancements must be a piece of the solution as we move through the conference committee process.”

The size of the budget gap likely would require a combination of tax increases if lawmakers chose the tax-hike route over making additional cuts.

Raising the state sales tax one percentage point from 5.5 percent to 6.5 percent would yield about $1.2 billion in additional revenue each year, according to rough estimates from the Ohio Department of Taxation. A half-percentage point increase would bring in $600 million each year.

Another option would be to roll back part of the 21 percent reduction in income taxes across all income brackets that began in 2005 and has been phased in gradually. For each percentage point reversed on that reduction across all income levels, the state gains about $100 million each year.

If lawmakers were to suspend the final round of income tax reductions for the upcoming two-year budget, the state would see about $450 million more come into its coffers each year.

Combining a one-percent increase in the state sales tax with the suspension of the income tax reductions over the next two years would produce an extra $3.3 billion in revenue — or about $100 million more than the size of the budget gap.

The total impact of all tax changes made as part of the 2005 tax legislation — including phasing out the corporate franchise and tangible personal property taxes — will reduce state revenue for the fiscal year beginning July 1 by an estimated $2.1 billion.

In addition to saying they don’t want to raise taxes, lawmakers from both parties also have said for months they don’t want to delay the enactment of the tax reductions. They believe the tax changes make the state more attractive to businesses and individuals.