Gov. John Kasich touted the benefits of his new tax plan for all Ohioans this month, but the governor is guilty of false advertising. His regressive tax proposal overwhelmingly would favor the wealthiest taxpayers. Most Ohioans would pay more.
The centerpiece of Mr. Kasich’s plan is an income tax cut that would reduce all Ohioans’ income tax liability. But most of the reductions would go to the wealthy few, with poor and middle-class Ohioans seeing little benefit.
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According to an analysis by the nonpartisan Institute on Taxation and Economic Policy, taxpayers in the top 1 percent of earners would enjoy an average income tax reduction of more than $13,000, and earners in the next 4 percent would get an average reduction of $1,395. By contrast, taxpayers in the bottom 20 percent would receive an average reduction of only $16; those in the middle 20 percent would get reductions of $219.
Those tax cuts might still sound like a good deal for everyone — but the money to pay for them has to come from somewhere. Mr. Kasich plans to finance the cuts in part with a 0.5 percent increase in the state sales tax, from 5.75 percent to 6.25 percent. The regressive tax would fall disproportionately on lower-income Ohioans, who pay more in sales tax as a share of their incomes than middle and upper-class earners.
Under the new system, Ohioans who earn incomes in the bottom 60 percent would pay more in taxes on average than they do now, while only earners in the top 40 percent would pay less. Ohioans in the bottom 20 percent would pay $116 more annually — close to 1 percent of their annual incomes.
To be sure, some of Mr. Kasich’s tax proposals are sensible. The governor hopes to increase the severance tax on oil and gas drilling from Ohio’s Utica shale fields. The tax would raise more than $250 million over two years and force oil and gas companies to pay their share for fracking on Ohio land. Still, Governor Kasich likely will have a hard time getting that proposal through the industry-friendly General Assembly.
The governor’s proposal also would increase the cigarette tax by $1 per pack. The tax should decrease smoking and improve public health, even though, again, the increase would fall disproportionately on poor Ohioans, who are more likely to smoke. To be fair, progressive income taxes that reduce the burden on the poor should accompany regressive measures such as the cigarette tax.
Mr. Kasich’s plan doesn’t come close to balancing the burdens. Even without the cigarette tax, the bottom 40 percent of Ohioans would still pay more under the proposal than they do now. The plan would advance the governor’s goal to eliminate the income tax, as some states have done, and replace it with increases in regressive taxes such as the sales tax. Income tax cuts also force local governments to rely more heavily on local property taxes, which undermines poor communities with low property values.
Regressive taxes not only increase the tax burden on the poor and middle class, but also encourage corporate executives to pay themselves more, even while slashing employee wages. Mr. Kasich believes, essentially, that tax breaks for the wealthy spur economic growth. Instead, they widen the state’s income gaps and inhibit consumer spending — and along with it, economic growth. Ohioans need a more-balanced tax plan to achieve real prosperity.
First Published February 20, 2015, 5:00 a.m.
