State Representative Diana Fessler represents Ohio House District 79 (Miami County, part of Darke County). Posted below is a summary of some of her concerns regarding the State budget (HB 66) approved April 12, 2005. Amended Substitute House Bill 66 (Am.Sub.H.B.66) is now pending in the Ohio Senate. At this time, public hearings before the Senate Finance Committee have been scheduled for May 18 - 19, 2005. The education portion of the budget was referred to the Senate Education Committee. Public hearings before the Senate Education Committee have been scheduled for May 11 - 12, 2005.
State budget: a massive tax increase By State Representative, Diana Fessler April 14, 2005
Two years ago, the General Assembly passed the biggest spending increase in Ohio's history. It was supposed to herald a new era of prosperity for all Ohioans. What it really did was saddle us with a six-cent gasoline tax increase, a one-cent temporary sales tax increase (a 20% increase), an expanded sales tax base, and more than 150 fee increases for everything from renewing our driver's license to getting a photocopy at the courthouse, to burying our dead. I voted against the bill. On April 12, the House of Representatives voted (54-45) on the second largest tax increase in Ohio's history. Proponents portray House Bill 66 as a "tax-reform" package, but the $1.96 billion tax cuts are overridden by a huge $4.2 billion tax increase.
Two years ago, Ohioans were told that the one-cent sales tax increase was temporary. In the FY 06-07 budget, half of that sales tax increase becomes permanent. That is a broken promise, not tax reform.
The bill is riddled with multiple tax increases and fees. A real estate transfer tax will bring in $106 million. What was supposed to have been another temporary tax, a tax on trusts, is being made permanent to bring in $74 million. Doubling the tax on alcohol and tobacco will generate $788 million. Commercial property taxes will go up 10%. The promised indexing of personal income tax has been cancelled to raise $191 million. The tax on electricity consumption is being increased by 30% to nab another $326 million. Many see this as legalized theft; not tax reform.
Our state government has taken the position that doing business in Ohio is a "privilege." The cost of this privilege is the payment of a new commercial activity tax, the CAT, a tax on gross receipts, not profits. Maybe less, maybe more. Some call the CAT the catastrophic tax. Richard Vedder, distinguished professor of economics at Ohio University, calls it a turkey, not tax reform.
Another disturbing aspect of the House version of the state budget is a provision permitting the Tax Commissioner to increase the CAT rate. Changing tax rates is a core responsibility of the General Assembly, not the head of a state agency.
According to a local car dealer, the "tax reform" will cost him $54,000 per year, and he says he can do without that much "reform." The owner of a large grocery store will face an additional $20,000 tax bill for just one store. I supported an amendment to exempt food from the CAT, but the amendment was defeated.
Retailers, including gas stations, are also protesting because of the CAT's pyramid effect: repeatedly adding the CAT tax to an item previously taxed, as each product makes its way from producer to consumer. The result: consumer prices will rise; that's not tax reform.
To offset the CAT harmless effects, proponents say that personal income tax rates will be reduced 21%. However, this reduction will be phased in over five years, making it a 4.2% reduction per year. Also, the tax increases will take effect in July, while the cuts in business-related taxes will be phased out over a number of years. That raises expectations, but it's not tax reform.
Funding for local governments, libraries and parks has been cut. However, a provision has been made for local governments to be eligible for additional funding providing they consolidate services. Consolidation is "code" for regionalization. That's coercion, not tax reform.
The bill contains an extremely controversial measure that overrides House Bill 920, a 1970s law that prevents property tax levies from generating more money than voters specifically approved. The bill permits inflationary growth up to 4% on up to 8 mills of a school district levy. Such "growth" added to property re-evaluation and existing property taxes will cause property taxes to rise at an even steeper rate and will, undoubtedly, force some people out of their homes because they simply will not be able to pay their property taxes. Senior citizens will be particularly hit hard and may well view this "growth" as voter-approved robbery, not tax reform.
Proponents also claim that a family making $63,000 per year will save $100 per year. However, the 2000 Census report shows that the median household income in Ohio is $44,000, so any potential savings will be considerably less and will likely be eaten up by multiple tax increases, fees and a rise in the cost of consumer goods.
Claims have been made that this tax reform will create approximately 10,000 jobs, statewide, per year. Those jobs divided into the 99 House districts means that, if successful, the tax reform should generate approximately 100 jobs per district. The new taxes in the bill will generate an estimated $2.25 billion net tax increase. Accordingly, on average, the people in each legislative district should expect to collectively pay approximately $23 million in new taxes each year in "exchange" for those potential jobs. That is a risky rate of return, not tax reform.
The bill in its current form is a massive change in state tax policy that will affect the state for decades. The Ohio Chamber of Commerce has a better tax reform plan that merits discussion and should be given full consideration. Let's hope that the Senate makes much needed changes before returning the bill to the House for a final vote.
I firmly believe that rational people know that we cannot tax our way to prosperity. I voted against the 2,700-page $51.3 billion General Revenue Fund budget because Ohio needs true tax reform and spending reform, not broken promises and higher taxes.