Kasich wants top income tax to be under 5%

Reduction would remove about $600 million to the state’s coffers.
MCT Regional News
Mar 10, 2014

Gov. John Kasich remains focused on getting Ohio’s highest income-tax rate below 5 percent, but exactly how he would get there remains unclear.

To drop the tax rate on income earned above $208,500, currently at 5.33 percent, to below 5 percent would likely mean an across-the-board rate cut of at least 6.3 percent, according to the Ohio Department of Taxation. That’s worth about $600 million to the state’s coffers.

That assumes the Republican governor sticks with his past strategy of broad cuts affecting the vast majority of Ohioans, rather than targeting just the top bracket number.

“We can get that tax rate under 5 percent,” Mr. Kasich said during his recent State of the State address delivered in Medina. “Balanced budget. Surplus. Regulatory predictability. Lower cost of doing business. That formula will work, and it is working for our state right now.”

But the proposed cut may also play into the image painted by his election-year critics that Mr. Kasich’s policies benefit wealthier Ohioans at the expense of the middle class.

When his administration unveils its proposals this week, the governor will have some help from income tax revenue growth during the first eight months of the current fiscal year that began on July 1, 2013. To date, the state has collected nearly $281 million, or 5.4 percent, more than it projected.

For all taxes, the state is running a more modest $217 million, or 1.7 percent, ahead of projections.

Mr. Kasich has made it clear he’d prefer to get rid of Ohio’s income tax altogether, frequently comparing the state to the handful of others, such as Florida and Texas, that have no income tax. But absent that, the 5 percent threshold seems to have taken on some symbolic importance.

“In many respects, it’s a PR thing,” said Greg Lawson, policy analyst with the conservative Buckeye Institute for Public Policy Solutions. “The lower it goes, the better it is and the less penalizing it is toward work, investment, capital accumulation, and things like that.

“Every little bit you do matters, but I think getting below 5 percent is symbolic,” he said. “It shows we’re very serious about reducing the income tax. It’s sort of the image of putting out the sign on all roads that we’re getting serious because we’re now below 5 percent.”

Zach Schiller, research director for the left-leaning Policy Matters Ohio, found the fixation on 5 percent to be ironic.

“In 2005, when they passed the 21 percent cut [over five years], why was it 21 percent?” he asked. “Not exactly a round number. It was to get the top rate below 6 percent. That was supposed to be some magical accomplishment. … So now it’s 5 percent.”

Assuming the Kasich administration pursues an even 7 percent cut across all brackets, Policy Matters’ studies suggest the top 1 percent of earners, those earning over $360,000 a year, would get 25 percent of the dollars saved, a tax bill $2,515 smaller on average.

“By contrast, the bottom 60 percent gets 14 percent, or less than one-seventh of the total,” Mr. Schiller said. “This is just in the nature of how an income tax works because it’s a progressive tax.”

For example, those earning between $34,000 and $54,000 would save $48 a year from such a cut.

Ed FitzGerald, the endorsed Democratic candidate to take on Mr. Kasich in November, argues that Mr. Kasich’s priorities are misplaced.

"Ed FitzGerald will prioritize economic growth and security for the middle class ahead of policies that disproportionately favor the very wealthy,” said spokesman Lauren Hitt. “John Kasich's tax schemes only benefit the most well-off, and Kasich fails to adequately invest in middle class Ohioans' most pressing concerns: job opportunities, education, and improving our infrastructure."

The Buckeye Institute generally also wants to see the income tax eventually disappear, but it is withholding judgment on Mr. Kasich’s latest goal until it sees the overall package he proposes to accomplish it. Last year, as part of his second two-year budget proposal, Mr. Kasich proposed a broadening of Ohio’s sales tax base and a hike in the state’s severance tax on shale-oil and natural-gas drilling to help pay for new income tax cuts for individuals and small businesses.

In the end, lawmakers ignored the drilling tax hike, made comparatively minor changes to the sales tax base, and raised the state share of the sales tax rate a quarter-cent, to 5.75 cents on the dollar.

The current two-year budget that took effect on July 1, 2013, included a three-year tax cut—a total 10 percent reduction for individuals across all tax brackets and a 50 percent cut on the first $250,000 earned by small businesses that pay the tax.

It marked a $2.7 billion tax cut after some offsetting from the higher sales tax rate, slight expansion of the sales tax base, and other maneuvers. That was on top of a total 21 percent income tax cut that was started in 2005 as part of a broader reform of individual and business taxes. The final increment took effect in 2011 just before Mr. Kasich took office.

All of Ohio’s neighbors impose a state income tax, and the Buckeye State is in the middle of the pack in terms of its highest bracket. West Virginia’s highest rate is 6.5 percent and Kentucky’s is 6 percent. Michigan, Indiana, and Pennsylvania all have flat taxes: 4.25 percent, 3.4 percent, and 3.07 percent, respectively.

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Jim Provance - The Blade, Toledo, Ohio (MCT)

©2014 The Blade (Toledo, Ohio)

Visit The Blade (Toledo, Ohio) at www.toledoblade.com

Distributed by MCT Information Services

Comments

MiddleRight

Policy Matters’ studies suggest the top 1 percent of earners, those earning over $360,000 a year, would get 25 percent of the dollars saved, a tax bill $2,515 smaller on average.
“By contrast, the bottom 60 percent gets 14 percent, or less than one-seventh of the total,” Mr. Schiller said. “This is just in the nature of how an income tax works because it’s a progressive tax.”
For example, those earning between $34,000 and $54,000 would save $48 a year from such a cut.

Notice that they don't tell how much in taxes those two different tax brackets are paying in.
If you're earning $360,000 at 5.33%, that's $19,188/year.
If you're earning $40,000, your tax liability is $1,210/yr.

I guarantee those earing over $360,000 provide alot more jobs than those earning $40,000.

former local

We'll have to see what cuts he'll make in order to pass the income tax cut he wants. Broadening the tax base, means higher taxes on those at the very low end of the income level.

JMOP

Why would you think it means higher taxes on the low income? In fact, I will bet it will remain the same, if not lower.

Contango

Re: "higher taxes on those at the very low end of the income level."

Depends on what they buy. Groceries should remain sales tax free.

truckin

oh come on,
most wage earners at the lower end get ALL the taxes withheld returned...
up to say 30grand
then add a kid or 2, maybe some mortgage interest deductions? a households can get up to around 45-50 and still get more returned than they EVER paid in plus free or reduced school lunches.
i am so sick of hearing about the "poor ol' low" wage earners..
Take a man and women with kids making less than 50 and truth be told they still qualify for ever freebie or reduction in every handout, healthcare, etc.and earned income returns.
All which greatly increase there bottom line
Fact a family just below the curve, lives as well as the family with 10-20 grand more
i have been self employed most all my life, with taxable income all up and down the scale. I've been heavily tax some yeas and got money back with never paying in before, depending on purchases/depreciation, kids born, home interest etc.
ENOUGH with the poor POOR. I don't see any under weight or without cable

Contango

Good first step.

The top marginal individual and business state income tax rate should be: 0%.

TrollingMotors

Yeah because that trickle down is doing wonders isnt it?

LOL

Dr. Information

Rich becoming richer faster than ever before under Obama. Thanks Obama :)

Contango

Re: "doing wonders,"

OH practices supply-side economics? I don't think so.

TX - no state income tax. Do likewise.

jas

Typical conservative morons who know absolutely nothing about economics fill the Comments once again. "Broadening the tax base" is a conservative code word for taxing the lowest income levels more. In what universe does it make any kind of economic sense to tax the poorest more? They don't have the money to contribute any significant taxes so why should they pay more taxes?.

The 30 year battle by the GOP to basically eliminate progressive income tax rates has destroyed the middle class in this country. Anyone who knows anything about economics and history knows that democracy does not survive in countries who do not have a strong middle class. The rich have gotten richer and the middle class has lost more than one third of its wealth in the last thirty years due to supply side economics which doesn't work and the deregulation mania. I defy anyone to show me a single major industry that has benefitted either consumers or tax payers by being deregulated. Deregulation has only resulted in paying more and getting less services being provided - the airlines are the best example as well as telephone services. Massive deregulation is a con job to provide more corporate welfare.

And finally, someone explain to me why the "job creators" who have failed to create jobs deserve to be rewarded with lower taxes. I always thought you get rewarded when you do a good job. The "job creators" have failed us all. Why reward them?

In my opinon

@jas...AMEN, finally a sensible comment. Kasich is a republican there for he is for the wealthy. Middle class has all but disappeared. It used to be 50-80 thousand was considered middle class now when Romney was asked what he considered middle class he says anyone making 200 thousand a year. And the wealthy really believe this. Thanks for post.

JMOP

Hello, the 80's are calling. They want their stereotype back!

Dr. Information

In my opinion. So because he is a Republican he is wealthy. Did you ever care to research the wealthiest congressmen of our nation? 7 of the top ten are democrats. Nice try but total failure

rbenn

LMAO you liberals kill me, didn't your liar and chief just hand you the largest tax increase ever with obummercare? Oh wait it wasn't a tax, oh wait yes it is. Kool aid kool aid here, if you do some research into campaign contributions and who the richest in Washington are, you might be surprised to see the dems lead the pack. Just sayin

TrollingMotors

Hey we cant all be like Reagan and triple the deficit raise taxes 11 times and raise the debt ceiling 7 times ALL during peace time and be praised as some Conservative haha

Sucks when 4th grade Math proves you wrong doesnt it?

rbenn

You did not once respond to what I said, you had to go back 3 decades to try and somehow justify your argument. Lets try this again, obamascare was originally not a tax was sold on not being a tax, then the supreme court said it was a tax then Obama skated around the lie like he does so well, hence the largest tax hike in history. And just wait and see how high this tax increase goes when the ones that are supposed to finance this debacle don't sign up which is happening as we speak. This entire aca law was sold on lie after lie, but denial flows through your fogged brains blaming everything on everybody else. Also I might add the majority of obamacare sign ups are people that had insurance to start with and were kicked off, the rest are Medicaid, the ones that didn't have insurance aren't even signing up for this trainwreck, so keep talking about Reagan, bush, Clinton, or any other president Im dealing in the now unlike liberals who have to go back aqnd find something to take the eye off of whats happing NOW!

MiddleRight

Regan was cleaning up the recession left by Carter(D). Unlike Obama who threw away $1 trillon on "shovel ready projects" that didn't create any jobs, Regan got people back to work.
Since Obama has been in office, all Federal taxes continue to increase. All tax brackets saw increased tax rates. Obamacare is a tax as defined by the supreme court. He let the 2% payroll tax cut expire.
Learn the difference between deficit and debt. No one has ever had a higher deficit than this administration.
http://www.treasurydirect.gov/ne...

MiddleRight

Here you uneducated fool

http://www.nationalreview.com/ar...!

Contango

Re: "progressive income tax rates"

No. 2 in the planks of Marx's "Communist Manifesto"

Any of the other planks you'd care to defend?

Dr. Information

Do away with the income tax.

JMOP

I see the one typical liberal, calling people with contrast opinions of theirs, morons. Who uses the words award and taxes in the same sentence?

I'm all for a flat tax, for all income. Why should I pay more than the lower tax brackets? Why should someone making more money than me, pay the into higher tax brackets?

TrollingMotors

The top earners got their temporary Bush tax cuts that were supposed to create jobs. Instead they didnt create jobs and needed stimulus to keep afloat.

Now they can have the high tax and let the middle class have a break.

Dr. Information

Obama renewed the Bush Tax cut, so they are now the Obama Tax Cut.

Most middle class citizens get thousands in returns when they file each year and when it all comes out in the laundry, pay next to nothing in taxes. Fact check that one you troll.

KURTje

OR..like most want - Flat Tax. No exceptions. Just like MJ, let the people vote. Or cut ALL elected official's pay & medical. Naw...that is too e-z.

jas

The GOP doesn't want to let "all" the people vote. They only want to let those who support their extremist ideas to vote. Thus we get repeated attempts to change the voting rules in Ohio when the rules we had worked just fine for over 200 years. Register, show up at the polls, sign your name, and vote. Even the GOP Secretary of State John Husted failed to find any significant fraud. Like my Grampa use to say: If it ain't broke, don't fix it.

Contango

Re: "If it ain't broke, don't fix it."

What about preventive maintenance?