Thursday, July 06, 2006

One Trick Ponies

For their next feat of governance the Statehouse Republicans will [drumroll] CUT TAXES!!!

[golf applause]

The latest round of Republicans jumping through the tax cut hoop come compliments of Golfer-in-Chief Bob Taft who announced yesterday that he is accelerating the timetable for some planned cuts in personal income taxes. This proposal joins the capital gains tax cut idea the GA is currently kicking around.

But here’s my favorite part:

    State revenues for the past fiscal year that were $220 million ahead of projections, coupled with underspending in programs such as Medicaid and education, prompted Taft to act, said Tim Keen, the director of the state's office of budget and management.
While tax cut dressage is usually a little scary to watch, this time it just reeks of desperation. People care most about education? Sorry, gotta cut taxes. How about putting those kids kicked off the Medicaid rolls back on? No way, let’s cut taxes. People worried about their jobs? Let them eat tax cuts.

Clearly, the Ohio Republican Party is out of ideas. The mainstream party, that is. J. Ken Blackwell has no shortage of ideas – all catastrophic. But the folks in the GA got nothin’. Tax cuts, gay bashing and unconstitutional abortion bans. That’s what we pay these guys for.

To be sure, part of the reason for all this is to tout the success of the tax reform package past last year. Do they deserve credit? Not really. Republicans knew over the duration of their sixteen years in power that the corporate franchise tax and taxes on tangible business property were antiquated and a drag on business. But they couldn’t afford to do away with either completely, and they couldn't shift to new taxes lest their next opponents yell and scream that they voted for a new tax.

Instead that they nursed corporate franchise along like the ancient nag it was, doing nothing to tend to her ills, but burdening her with ever-gaudier and heavier tack. Finally, they had no choice but to shoot her.

They took the chance on CAT – the Corporate Activities Tax. Which J. Ken condemns as a new tax without acknowledging the old tax it replaced. Glad to know those fears about political gamesmanship were unfounded.

Meanwhile, the to cut income tax wins a trifecta of policy badness.

First, the priority is wrong. For years, the state has balanced the budget by eroding support for K-12 and higher education. If the money is there, now is the time to invest (that’s for you Naugle) in education. When I was lobbying on the budget bill, we heard more than once that the phase out of the tangible business property tax and the changeover to CAT would boost the economy raising more money and allowing the GA to make up for the cuts in support for education. Well, the revenue boost happened, but for the second time Columbus is giving the revenue away instead of making the education sector whole again.

Second, the tax cuts as a pump-priming strategy. If the idea is to put more money into the state economy, cutting taxes is a singular inefficient way to do it. Because state income taxes are deductible from Federal income taxes, a dollar cut in state taxes results in less than a dollar actually going to the taxpayer, with the balance going to the Feds.

Finally, these particular tax cuts are morally indefensible. If – and it’s a big if – it makes sense to cut taxes, it makes the most sense to cut the most regressive taxes – sales and real property taxes. The GA could cut or phase out the half-penny tax they kept in the budget. Or they could increase property tax roll-backs. Or they could give enough in state aid to schools that fewer need to ask for levy increases.

If Ohio is truly turning a corner, that’s great news. But one would hope that our elected officials would show a little more imagination than to just – oops. Stepped in something.


Jeff said...

Great post! Love the equestrian theme. I missed your blog while I was away.

Anonymous said...

they are fooling themselves if they think the CAT is going to be a revenue winner. according to the dept of taxation's point person on the CAT and TPPT phase out there will be significant shortfalls in the coming years. this was the assesment given in no uncertain terms to a room full of people who attended an informational presentation late last year. when reality finally cathes up with the state they will most likley have to raid the local govt fund to cover their mistakes.