Proposal would postpone state tax cut
By Marc Kovac
The governor’s proposal would postpone the last year of a five-year tax-cut plan.
COLUMBUS — Democrats in the Ohio House moved late Friday afternoon to start legislative proceedings on Gov. Ted Strickland’s proposal to freeze tax rates at 2008 levels, indefinitely postponing a tax cut that was to take place this year.
House Speaker Armond Budish, a Democrat from the Cleveland area, said hearings could begin as early as Monday on the bill, which includes a 5 percent pay cut for state lawmakers.
“It is not a tax increase,” Budish told Statehouse reporters during a conference call. “No Ohioans will pay more in income taxes than they paid last year, even after the temporary freeze is in place. In fact, every Ohioan, assuming the same level of income, will actually pay a few dollars less than they did in the prior year because of the increase in personal exemptions.”
Late last month, Strickland proposed postponing the last year of a five-year tax cut plan after the Ohio Supreme Court ruled that plans to place slot machines at horse-racing tracks were subject to a voter referendum — a move that effectively tied more than $850 million in school funds needed during the current biennium.
The governor subsequently abandoned the video-lottery terminal plan for the short-term, and he said it wasn’t feasible to cut $1 billion from the education budget, nor force a sales-tax increase on Ohioans.
A family of four with a household income of $60,000 paid $1,474 in taxes in 2008. Under Strickland’s plan, they’ll owe $1,467 for 2009, a savings of about $7 over the previous year. Under the planned tax cut, they would have owed $1,389, $85 less than in 2008.
The rates increase with income.
Budish said he and members of the House’s majority caucus discussed different options for dealing with the budget hole. They agreed that postponing a planned tax cut until 2011 was the best choice.
“We have made many difficult choices [including] cutting spending by almost $4 billion and significantly reducing the size of the state work force,” Budish said, adding later, “We have cut government to the size where it was during the Reagan years. We’ve cut thousands of state employees. We’ve cut state spending by billions of dollars. The approach we’re taking today avoids cutting another $850 million and probably more from education.”
He called the 5 percent pay cut for lawmakers a shared sacrifice, given the state’s economic circumstances. Lawmakers earn a base salary of $60,584, with those in leadership and serving as committee heads making more.
“[The 5 percent cut is] approximately what the state employees have taken recently as a pay cut,” Budish said. “And it seemed to be a fair amount. We have many legislators who do not have any outside employment other than working as a legislator ... and a 5 percent cut will be a cut that is felt by our legislators.”
Strickland praised the House Democrat’s decision. In a released statement, he said, “Of the options available to us, I believe postponing the last part of the scheduled income-tax reduction will protect our schools from destructive cuts while avoiding a sales or other tax increase on Ohio families and businesses during this recession.”
He added, “All state employees are taking pay cuts in each of the next two years. The people of Ohio have a right to expect their elected leadership to share in the sacrifices that so many Ohioans are making in this national recession.”