Kasich Tax Plan a Mixed Bag

Columbus Dispatch:

After weeks of speculation, Gov. John Kasich delivered a full slate of policy proposals to the legislature yesterday, including a three-year, $2.6 billion state income-tax cut that would drop Ohio’s top tax bracket to 4.88 percent.
Kasich’s tax changes included a few wrinkles that could dampen some criticism from the left — that Kasich’s tax cut was too heavily weighted toward benefiting the rich — by expanding a tax credit and deductions for low- and middle-income earners.
But that is just one side of the tax package. Kasich’s proposals include more than $2.4 billion in tax increases, resulting in a net $174 million tax reduction over three years for Ohioans.
Early indications suggest that Republicans in the GOP-controlled Ohio House might object to some tax increases. Kasich proposed increasing the state’s tax on cigarettes by 60 cents, to $1.85 per pack; taxing other tobacco products, including electronic cigarettes, at an equivalent rate; raising the Commercial Activity Tax on gross receipts for businesses by 15 percent; and implementing a new tax on shale drillers....
Kasich proposes increasing the earned-income tax credit for low-income Ohioans from 5 percent to 15 percent of the federal credit. That’s a jump by an average of about $84 for a credit he signed into law last year that would affect about 475,000 Ohioans. The state’s personal exemption would also increase from $1,700 to $2,700 for Ohioans earning less than $40,000 annually and from $1,700 to $2,200 for those earning $40,000 to $80,000.
Kasich wants to raise the Commercial Activity Tax on gross receipts for businesses from 0.26 percent to 0.3 percent, providing $743 million in three years; and gradually implement a 2.75 percent tax on oil and gas extracted from horizontally drilled and fractured wells, generating $874 million in three years.

Meh.  The governor's obsession with the top marginal rate in the Ohio state income tax seems a little odd to me.  He seems to have a round number issue.  Currently, an individual in the top bracket would pay $8671.63, plus 5.42% on all income over $208,500.  In 2005, a person would have paid $11,022.90, plus 7.185% on all income over $200,000.  That means the person is paying almost $3000 less in taxes (almost 27% less) on the first $208,500, and almost 25% less on each dollar beyond that.  The governor has been worried about the jackasses who supposedly would move to other states to avoid the income tax.  Where do most of those people go?  Florida.  And, you know, there is no reason other than taxes for someone to spend six months of the year in Florida rather than Ohio.  I'd say that 5.42% is just fine as a top rate.

As far as the governor's tax increases go, I'm ok with a tax on businesses, but the CAT tax is just stupid.  It only taxes sales within the state, and not sales outside of the state.  It is also a bigger tax on low-margin businesses than it is on high-margin businesses.  I'm also good with the tax on oil and gas extraction, but suspect that it should be higher.  I'd be curious to see a comparison to what Texas gets.  As for the cigarette tax, it just seems like he's piling on.

Finally, it is good to see the earned-income tax credit expanded in his proposal.  It helps balance out the governor's fellating rich folks with the income tax cut.  Overall, Kasich's tax cut proposal is an overall loss for the state, especially rural and urban areas, but that's what you get with Republican domination of state government.  At least we aren't Kansans.