Ohio tax cut delay means less cash for taxpayers
APNews
Dec 17, 2009
Ohioans will pay more in 2009 taxes than expected because a budget compromise expected to clear the Legislature on Thursday delays the last in a series of tax cuts begun four years ago.
The agreement delays a scheduled income tax cut to fill an $850 million budget gap while preserving state funding to school districts, which would have taken a hit if it had gone through. Educators and community leaders had spent the last week complaining loudly about the financial hardship they faced as a result of the budget impasse.
For the majority of Ohioans, the deal means they will have to forgo tax savings of less than $100.
The deal reached late Wednesday night resolved what had been increasingly tense negotiations between Gov. Ted Strickland and Democratic lawmakers on one side, and Republicans loath to suspend a tax cut on the other.
On Thursday, a small group of Republicans is expected to support Strickland's plan to delay the final round of income tax cuts set in motion in 2005. In return, Democrats agreed to a pilot project to test proposed construction contracting changes they believe aren't ready to be implemented on all public projects. The agreement secured enough votes to get the deal out of the House and Senate, and to the governor's desk.
A Senate committee is expected to approve the plan Thursday, followed by votes on the House and Senate floors.
The deal impacts the wallets and pocketbooks of Ohio taxpayers, but not by much, many lawmakers would argue. It postpones for two years the final installment of what was to be a 21 percent income tax cut begun under Strickland's predecessor, Bob Taft.
The lowest 20 percent of earners, making $18,000 or less, will have to pay only $2 more for 2009 than they would have had they received the 4.2 percent reduction in the tax rate, according to the Institute on Taxation and Economic Policy. The top 1 percent, earning $319,000 or more, will pay $1,980 more. And those in the middle 40 percent, earning from $32,000 to $76,000 a year, will pay an additional $37 to $69.
Without the deal on the tax plan, or an alternative proposal to cut $850 million from other state programs, the money would have been taken from school districts. Many had feared a direct impact on the classroom because of fewer teachers, larger classes, and a reduced ability to provide textbooks and supplies.
Republicans opposed to the tax cut delay because they said not delivering the money to taxpayers as planned would negatively impact the economy. Democrats said the state spending cuts that would result instead would be more harmful.