Kasich Budget Plan Includes Tax Cuts, Tax Increases, And Medicaid Expansion

Feb 3, 2015

Governor John Kasich
Credit State of Ohio

Ohio Governor John Kasich's third state budget plan unveiled yesterday brings back some proposals budget watchers and state lawmakers have seen before.

Ohio Public Radio's Karen Kasler reports.

The two year, nearly $70 billion budget weighs in at 719 pages. And as has been the case with his last two budgets, Gov. Kasich is again cutting income taxes – with a 23% across the board income tax cut and the elimination of taxes on a million small businesses with less than 2 million in gross receipts. Tax Commissioner Joe Testa says it’s the next chapter in Kasich’s overall tax reform plan.  
“We’re continuing our focus on shifting from a dependency on income for state revenue to shifting more toward consumption – away from income based, to more consumption based. We still believe that that’s the right thing to do, and we still want to move in that direction.”  
That direction includes $5.2 billion in new taxes, featuring several increases that Kasich has proposed before: a dollar hike in the tobacco tax, raising it to $2.25; a 6.5% increase in the tax on oil and gas drillers; a 25% increase in the commercial activity tax or CAT; and a half-percent hike in the sales tax to 6.25% and a broadening of the tax to services that aren’t paying it now. With the income tax cuts and a doubling of the income tax exemption for low-income Ohioans and an increase in subsidized child care for people making up to 300% of the federal poverty level – that’s a total of $5.7 billion in tax cuts and benefits. Taking out the tax increases, that’s a $523 million dollar tax cut. Kasich also says the budget ups spending on K-12 education, but changes the funding formula so that districts with lower property wealth and lower incomes will get more state help.  
“It stands to reason even though we are now increasing K-12 funding by another $700 million, that means over that biennium and this we will have increased K-12 funding to the highest level it’s ever been by $1.7 billion, we believe that money ought to be distributed on the basis of capacity.”  
For higher education, Kasich wants tuition caps at 2 percent in the first year and a tuition freeze in the second, and he’s proposing a $120 million fund to help students with debt. And the budget also includes Kasich’s Medicaid expansion from last year. Kasich says he knows it may be difficult to get some of these ideas by skeptical lawmakers, especially those they’ve rejected before. But Kasich says he hopes they’ll – quoting him here – get with the spirit of it, and if not, he wants to hear their ideas.  
“What would you want to jettison? You want to get rid of the small business tax cut? You want to cut back on the benefits to the working poor, so they will work harder and get out of being poor? Do you want to say that our rates ought to be high so people continue to move out of this state? So you got a choice. And I’m actually pretty optimistic about our package.”  
Kasich’s fellow Republicans, Senate president Keith Faber and House Speaker Cliff Rosenberger, said last week they aren’t thrilled with tax shifting. And some Republicans have also said they’re concerned about the size of recent budgets. The first year of this proposed budget has a 12.5% increase over the current budget, and a 4.8% increase over that first year of spending in the second year. But Kasich says the costs of the tax cuts and more money for education will pay off with creating more businesses and jobs and keeping younger Ohioans in the state.