The Nitty Gritty Part Four
by Glynn Keno for 3rd Rail Politics
My, my, my, how time does fly (or clocks get moved up). It's already spring, except for some pesky blizzard conditions here and there, and that means it is almost time for the Ohio House of Representatives to make some decisions on how the state's operating budget bill will be changed before they send it over to the Senate to work on after the Easter (excuse me, PC police, spring) holiday break.
Speaking of taxes, for many Ohioans it is now time to pay the annual ransom to continue to pretend that you “own” your own property. For a large number of our fellow taxpayers who have their property taxes rolled into their mortgage payments, there is just another month of making the same payment to the bank, and one (shorter) step closer to “owning” that parcel or dwelling outright.
For those of us who don't, seeing the envelope in the mail from the county auditor reminds us of just how tenuous that “ownership” might really be. Property taxes go to pay for a number of things, such as schools, police and fire, seniors, libraries, etc. Most are items that a resident of a county or municipality would consider a common good, and arguably all benefit from the services rendered.
House Bill 49, if adopted as written, would add the authorization for another entity to approach voters in order to obtain part of the property tax pie: multi-county health districts. Right now, only a single county, multi-jurisdiction district can go to voters in a county for a levy as a general health district. Under provisions of the bill (section 3709.29), a multi-county district will be able to do this as well.
One can just see now how this might turn out: small counties join with a metropolitan county to create a district; new joint district goes to commissioners for money outside of the ten mill limits for funding; majority of voters in the larger metropolitan county vote for the levy, while majority of voters in smaller county vote against; levy passes because of the concentration of votes in the larger county; smaller county property owners get hit with a property tax increase to fund something from which the larger county reaps the majority of the services. This will have the effect of allowing the voters in one county to raise the property taxes of voters in another county.
"In theory, a multi-county health district might save money if enough efficiencies are found and older structures are eliminated to make way for the new ones. However, and this is a big caveat, this assumes we deal with structural costs that will bid up the cost. Think of collective bargaining," said Greg Lawson, Senior Policy Director for the Buckeye Institute. "I wrote a report back in 2011 that made the case consolidation could be good IF collective bargaining reform happens first. If not, the taxpayers, especially as you note in smaller areas, will likely get stuck with a higher bill and no better, if not worse services."
Another area in which the taxpayer will be directly impacted is the area of the sales tax.
The budget seeks a modest increase in this tax from 5.75% to 6.25%, a half percentage point increase. This would be the second time in the last three budgets that this method of revenue-generation to balance the budget would be used. The tax was increased a quarter of a percent in 2013 under a previous budget, from 5.5% to 5.75%.
Given the county piggyback sales tax, this means that should the Assembly decide to adopt this proposal, sales taxes will net from 7% to 8.5% in counties throughout Ohio. With this change, the state would take in an additional $1.4 billion in Ohio taxpayer funds. Although arguing that the income tax changes make this an overall net tax reduction (of approximately $39 million) doesn't lessen the impact that such sales tax increase would have on the lower and middle class taxpayers, who tend to purchase taxable items as a larger percentage of their income than do those with higher wealth/incomes.
Many argue that this tax is regressive, and there may be an argument to be made in this respect. Others believe that the proposed budget's trade-offs between income and sales taxes makes sense over the long term, and raise concerns that the sales tax doesn't cover all sources of consumption.
Not to worry however. There is a way this disparity is brought closer to level: expand the sales tax base to include services that are by and large sought by those of more means. This base expansion includes travel services, cosmetic surgery, lobbying, interior design and landscape services. This is projected to bring in an additional $437 million in tax revenue.
One would wonder if at least one or two of these proposals are already dead on arrival, as cosmetic surgeons have made a number of good arguments against this expansion (and can be significant donors to politicians) and well, of course, lobbyists who get to show their chops to their clients by killing a sales tax on their services also make a number of interesting arguments. If the Ohio Lobbying Association fails to make their case, then some of the other “lower tier” base expansion services, like cable subscriptions and repossession services, are likely not going to be able to avoid becoming taxable services as well.
Funny thing in all of this is that in nearly every legislative session there are proposals to exempt certain products and services from the sales tax, or create “sales tax holidays” for various consumer purchases. So, while Finance committee members are determining how much more sales tax to put on Ohio residents, their colleagues are churning out bills to repeal sales taxes on feminine hygiene products (HB 61), sales tax refunds for vendors on bad debts (HB 104), and exempting optical aids from sales tax (HB 116).
Parents of school-age children should prepare to have a holiday on school supplies and clothes (HB 89 and SB 9) in early August. This “holiday”, which has been adopted in previous sessions, will likely again be as soon as the next House session, as the House Ways and Means committee has passed SB9 on March 30th.
The budget will continue to be debated through the end of June and we will continue to focus on the under reported budget items included in H.B. 49.