Ohio Senate approves budget, tax plan amid heated debate

Thursday, June 2, 2005

(Toldeo Blade)

COLUMBUS - The Ohio Senate early this morning voted 19-13 for a massive overhaul of state tax law, despite often acrimonious debate resulting at one point with a threat to forcibly remove a Democrat from the chamber.

"I'd like to know how an income tax cut for the top 2 percent of the state would help anyone in Youngstown, Ohio," Sen. Bob Hagan (D., Youngstown) said repeatedly.

His persistent protests against passage of the $51 billion, two-year budget prompted Senate President Bill Harris (R., Ashland) to threaten to have the sergeant-of-arms escort him from the room.

It never came to that. A moment later, Mr. Harris called a recess of 4 1/2 hours, something he'd planned to do anyway to accommodate Sen. Gary Cates, a Butler County Republican who made a quick trip to southwestern Ohio to attend his son's eighth-grade graduation ceremony.

Republican Sens. Lynn Wachtmann of Napoleon and Jim Jordan of Urbana joined all 11 Democrats in opposing the plan. The bulk of Gov. Bob Taft's proposed tax reform has survived both chambers intact. It includes a 21 percent across-the-board reduction in personal income taxes over five years, elimination of all income taxes for those earning less than $10,000 a year, and a gradual replacement of two taxes on business profits and plant investments with a new tax on gross sales.

The business tax plan has been embraced by equipment-heavy manufacturers, but berated by retailers, auto dealers, and others with high-volume sales but low profit margins.

The plan attempts to counter the lost revenue with higher taxes on cigarettes, electricity consumption, high-end investment coin transactions, and many increased fees for services.

"This will start the beginning of the end of my business…," said Jeff Kathman, owner of Cut Rate Tobacco Stores in Cincinnati.

"If the tax is voted through at its current proposed rate, it will put the difference between Ohio and Kentucky at well over $7 a carton."

Retailers argue Ohio will lose cigarette sales to Kentucky, Indiana, the Internet, and Indian tribes, while seeing its price advantage on the northern border with Michigan reduced from $1.45 per pack to 75 cents.

The budget would make permanent half of the current penny-on-the-dollar sales tax surcharge, breaking a promise by lawmakers that the surcharge would expire on June 30.

"I think it's right that income taxes for all Ohioans are reduced by an equalized 21 percent, except for the lowest wage earners, who will receive a 100 percent tax cut," said Sen. Randy Gardner (R., Bowling Green). "We think that's a good plan to move Ohio forward."

The budget now returns to the House, which likely will set up a joint conference committee to hammer out a compromise between the differing plans. Among the issues to be worked out is how to distribute billions among school districts and nursing homes, which consumption taxes to increase, and the type of controls that should be placed on the Bureau of Workers' Compensation in the wake of its $55.4 million investment in rare-coin funds operated by prominent Toledo area Republican fund-raiser Tom Noe.

"Ohio is journeying from the back of the line to the front in how we do taxes," said Sen. Ron Amstutz (R., Wooster). "Instead of being used as a blunt instrument by other states against us, our tax system will become a clean, simple, marketing tool kit that will bring a better future."

The tax plan is expected to generate about $1 billion less over the biennium than would have been otherwise expected with normal revenue growth.

To compensate, the budget would cut revenue-sharing support for cities by 20 percent. Toledo expects a cut of about $3.6 million.

Counties would be cut 10 percent and public libraries would suffer a 5 percent reduction. The Senate plan eliminates proposed cuts for villages and townships.

The budget removes 25,000 working-poor parents from the Medicaid health-care rolls and eliminates a program providing prescription drug assistance on the poorest of uninsured Ohioans dependent on medication.

Contact Jim Provance at:
or 614-221-0496.


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