Dispatch Guest Column: Medicaid Reforms are Smart Financially & the Right Thing to Do

In this Dispatch guest column, the President of Ohio Right to Life explains why Ohio’s Medicaid reforms are a wise financial decision and the right thing to do:

Memo to tea party leadership: Average Ohioans, like average Americans, decided as long as 15 years ago that it is intolerable in a country as wealthy as ours for people, even poor people, to not have medical coverage and regular care.

That is why you are so out of step with Ohioans when you oppose Gov. John Kasich’s common-sense plan to take advantage of 100 percent federally paid Medicaid coverage for an estimated 275,000 poor, and in many cases sick, Ohioans, an estimated 75 percent of whom are working.

As a Republican, I don’t like Obamacare any better than you do. Like you, I worked to defeat Obama last fall. But we didn’t win. And we can’t let the philosophical opposition of the last election cause us to make a serious error in business judgment now.

By opposing this extension of Medicaid to fellow Ohioans, you put our state at serious financial risk.

And you also put the conservative movement at political risk.

Like it or not, Obamacare is now the law. One of the things it will do is to withdraw “ disproportionate share” payments to hospitals all over Ohio. This is funding the federal government has given for years to hospitals that provide uncompensated care to poor and indigent patients. The logic was that since the law expanded Medicaid, this disproportionate-share funding no longer would be needed. But the Supreme Court upset the Medicaid-expansion mandate, so Ohio now has the worst of both worlds: withdrawal of charity-coverage support for hospitals on one hand, and no program to replace it on the other.

Kasich has wisely put practicality at the forefront and proposed voluntarily taking the federal offer to expand Medicaid coverage, thus rebalancing the equation. Make no mistake, the failure to regain this balance will cause our major hospitals severe financial distress, weakening all of our health care.

I understand the emotional resistance to Obamacare. But this opposition to Medicaid expansion isn’t even smart politically.

While the reasons could be debated all day long, the fact is that the 275,000 Ohioans who would be covered under the Kasich plan are both poorer and sicker than average Ohioans. Some are victims of their own life decisions, but others are pushed to desperation by the ugly economic and job environment we now face. Most are working, but for very low wages.

Do tea party leaders really want to say “To hell with these fellow Ohioans”? Are you so bound up in ideology that you are willing to sacrifice the health of neighbors to that ideology, based on funding concerns that may or may not happen in five years? I know that the response is that your ideas of how to cover these people are superior. I agree, but we didn’t prevail. Are we going to say, “Wait four years while we get our act together and maybe win and maybe come up with a better plan?”

A similar kind of ideological, rather than compassionate conservative, response already has cost us the goodwill of the growing Hispanic community in America in the immigration debate.

In the Medicaid debate, Republican and independent women are among the strongest supporters of ensuring that all families have medical care. Do we really want to alienate this constituency in the same thoughtless way we turned Hispanics against conservatives?

Not this conservative. And, thankfully, not Kasich, who is fulfilling his duty to be governor of all Ohioans. His compassion, like his compassion for families facing autism and his compassion for poor kids with comparatively minor drug violations, describes for me what compassionate conservatism is about. He deserves support for this initiative.

You can read the original column here.

Bloomberg: The Ohio Model Would Help Boost America’s Environment for Job Creation

Ohio

This Bloomberg column shines a spotlight on Governor Kasich’s Jobs Budget 2.0 proposal as a model that would serve other states and the nation well to spur job creation:

The federal government gets lots of attention for how its policies affect the health of small companies. What states do (or don’t do) is often overlooked, even though their policies matter, too.

That’s why I’m drawing attention to Ohio Governor John Kasich’s 2014-15 budget plan. His current budget’s unusual focus on small business is already raising eyebrows (and his previous economic policies have attracted controversy), but it should serve as a model for other politicians interested in increasing hiring and economic growth. Remember, small employers account for half of private sector GDP and employment, according to the Small Business Administration.

What I find most appealing about the governor’s plan: It shifts Ohio’s taxes from a heavy reliance on income taxes and toward greater reliance on consumption taxes. Under the proposed plan, income tax rates would be cut 20 percent across all brackets, with the highest marginal rate falling from 5.925 percent to 4.74 percent, and the sales tax base would be broadened to encompass most services to make up the shortfall in revenue.

Many mainstream economists believe the economic distortions that taxes impose are smaller if governments rely on consumption taxes rather than income taxes. Income taxes penalize savings by reducing the financial return to invested capital, encouraging people to consume more and save less than they should. This excess consumption reduces the amount of capital available for investment, which in turn hinders innovation and lowers future living standards.

By shifting taxes to consumption, the governor’s budget reduces this distortion, bringing savings closer to the optimal amount for investment. Not only do small business owners benefit (as all taxpayers do) from the reduced economic distortions, they also benefit as borrowers from increased savings.

The governor’s plan also proposes tax relief for all owners of pass-through entities—sole proprietorships, S corporations, and partnerships—by excluding 50 percent of up to $750,000 of net business income from taxes. This tax cut will encourage business owners to hire and invest. Research by Robert Carroll, an economist at the Tax Foundation, and colleagues shows that policies (such as an income exclusion) which boost small business owners’ after-tax income increase the odds that their companies will hire and make capital investments. Given the slow pace of small business investment and hiring in recent years, this incentive is a welcome stimulus.

Finally, the governor is offering tax relief to investors by allowing both active and passive business income to qualify for the exclusion as business income on personal tax returns. Cutting taxes on income earned from investing in small businesses is an important component to stimulating the sector because many growth-oriented entrepreneurs need outside capital to expand. This policy shift will encourage angel investors to take more bets, making it easier for growth ventures to raise money.

It’s a shame that Kasich is only the governor of Ohio. His plan would work even better at the federal level, where taxes are higher. Cutting state taxes, which are relatively small, won’t stimulate small business owners to hire and invest as much as cutting federal taxes, which are relatively large. And, of course, the governor’s plan only affects the taxpayers of Ohio.

But Washington might see Governor Kasich’s budget plan as a model that other states and the federal government can copy in their efforts to boost small business investment and hiring. And even if those in our nation’s capital don’t recognize the wisdom of the governor’s approach, he might take his plan to the city on the Potomac in 2016, after proving its merits in the Buckeye State.

You can read the entire column here.

WSJ: Ohio is Recovering Faster Than Other States – Setting Example for Others

OhioJobs

In this editorial, the Wall Street Journal highlights Ohio’s ongoing recovery and the progress we’ve made since John Kasich became governor. Read more below and please share:

Few states outside the South and Mountain West have recovered faster from the financial crisis than Ohio, and now Governor John Kasich is betting on tax reform to keep it going. He’s another GOP statehouse executive creating a sharp policy contrast with California, New York—and Washington, D.C.

The plan’s centerpiece is a 20% cut over three years in all of the state’s nine income tax rates. The top rate would fall to 4.725% from 5.925%. Ohio allows its cities to impose add-on income taxes, so the current rate in cities like Cleveland can reach 8.4%.

The plan would also provide an income-tax deduction on half of all small business and Subchapter S income up to $750,000. This effectively cuts the tax rate on job creators in half, but the income cap sounds like something from the Obama White House. Businesses that earn more than $1 million are most likely to expand operations from such a tax cut and should get it too.

To offset any lost revenue, Mr. Kasich wants to raise extraction taxes on drilling in the Utica Shale. The oil and gas industry hates the idea, but this makes more economic sense than taxing work and investment across the economy. The new severance tax would raise about $500 million a year and be in line with those of other energy-tax states. Drillers should note that extraction taxes in Alaska, North Dakota, Texas and Wyoming help to keep income taxes low, while funding schools and police, and creating a political constituency in favor of drilling.

Mr. Kasich also wants to reform the sales tax, cutting the rate to 5% from 5.5% in exchange for taxing about 75 goods and services that are currently exempt. Barbers, accountants, lawyers, bowling alleys and funeral homes would now be taxed. An avalanche of lobbyists has descended on Columbus to protect these tax-free fiefdoms, and the Governor could get buried.

And

Ohio’s jobless rate has fallen to 6.7% from 9% since Mr. Kasich took office in 2011 focused on spending control and job creation. The $7.7 billion deficit he inherited has turned into a $500 million surplus, and the American Legislative Exchange Council now ranks Ohio’s economic policy as 25th in the U.S. from 42nd in 2008.

But the state still has a long way to go to compete with no-income-tax Florida or Texas. Ohio’s tax system hasn’t been fundamentally redesigned since the Great Depression. If Mr. Kasich can beat back the corporate lobbyists and public unions, he’ll turn Ohio into an even bigger growth story…

You can read the entire editorial here.

Editorial: The Jobs Budget 2.0 Promises a Brighter Future for Ohio

After balancing Ohio’s budget in 2011, the recently introduced Jobs Budget 2.0 offers Ohio a continued path toward recovery. The Dispatch has more below:

Ohio today is a healthier state with a brighter future than two years ago, when newly elected Gov. John Kasich introduced an austere state budget that included deep cuts in education and local-government spending.

The budget was painful, but today’s improving fortunes are tied directly to it. By erasing an $8 billion gap between revenues and spending and creating greater efficiency in state government, that budget put the state on a sustainable path.

Two years ago, The Dispatch said of that document: “…this plan begins the process of reshaping state government to cope with hard times now and hasten the return of better times in the future.”

Indeed, while Ohio has a way to go to reach the levels of prosperity known in the past, “better times” clearly are here, and the new two-year budget introduced by Kasich on Monday reflects that.

This time around, budget-builders started with books essentially balanced and with a welcome tailwind from an improving economy and ramped-up economic development. This allowed Kasich to propose restoring much of the education spending cuts of two years ago, as well as reforming the state’s tax code in ways that will ease the burden for small businesses and low-income earners while making Ohio a more-attractive place to run a business.

While the state’s rainy-day fund had been drained to, literally, pocket change two years ago, now it is expected to hit $1.9 billion by June 30 — enough to trigger an automatic 4 percent income-tax cut for the year.

Democrats, predictably, are criticizing the budget plan, but their credibility on the issue is nil. They controlled the House of Representatives and the governor’s office prior to Kasich’s election and proceeded to abdicate fiscal responsibility, leaving the state with an $8 billion time bomb — unsustainable spending propped up by accounting tricks and one-time revenue sources. They’re the last folks who should carp about a balanced budget that includes important reforms.

Kasich’s proposal would lower taxes overall by $1.4 billion over three years, but that’s the sum of many moving parts. Individuals would see a 20 percent reduction in income-tax rates, to be paid for via the reasonable increase Kasich proposes in the severance taxes paid by developers who will profit from Ohio’s shale boom in oil and gas. Republican lawmakers who continue to oppose the severance tax fail to recognize two facts: With the change, Ohio still would have severance-tax rates at or below those of neighboring shale-producing states, and an income-tax cut would benefit all Ohioans.

Small businesses that are taxed through owners’ income taxes would see an even-bigger drop: The tax on the first $750,000 in net income would be cut in half.

Proposed sales-tax changes would give a break to lower-income Ohioans, who are most affected by taxes on necessities, by lowering the state rate to 5 percent from 5.5 percent. But because it would close a giant loophole, by imposing the tax on services that now enjoy an unjustified exemption, it would increase the overall sales-tax take by $1.3 billion the first year and $1.8 billion the year after. Many of the newly taxed services would be those more typically used by those with higher incomes — legal, architectural and marketing services, for example.

After two hard years, Ohio is headed upward, and this budget promises to make the climb easier.

You can read the original editorial here.

WSJ: Ohio’s Governor Kasich is Tossing Politics Aside to Fix Ohio

While the nation’s credit rating has been reduced, ours has been upgraded in Ohio due to long-overdue reforms that Governor Kasich and legislative leaders have passed. You can read more below from the Wall Street Journal about how Republican Governors are tossing politics aside and making the difficult decisions to fix our states:

Ohio and Florida get plenty of attention as Presidential election swing states, but this year they deserve notice for another reason. While Uncle Sam was having its debt downgraded, Ohio and Florida both got upgrades from Standard & Poor’s in July as a result of their improved fiscal management.

In its report on Ohio, the rating agency attributed its upgrade to AA+ stable from AA+ negative to the Buckeye State’s budget reforms. Governor John Kasich pushed through a budget that closed a roughly $8 billion deficit without raising taxes. S&P also noted the moderate economic recovery and an unemployment rate that fell to 8.6% in May 2011 from 11% in March 2010 as signs of a better long-term fiscal outlook.

And

These shifts in state fortune are all the more remarkable because they come despite the end of the federal stimulus cash that began in 2009. States that rely heavily on such federal payments are more vulnerable to a downgrade now that the U.S. government has suffered its own credibility damage. The raters assume that no more federal cash will be forthcoming.

But S&P pointed out recently that ratings for state and local governments can be higher if they show they “maintain stronger credit characteristics in a stress scenario” and can offset the loss of federal cash thanks to “financial flexibility and independent treasury management.” That’s credit-rater-speak for saying that a state will be rewarded if it gets its act together.

These newly elected Governors have their share of political bruises for pushing reforms, and both Messrs. Kasich and Scott have suffered in the polls. But the credit upgrades are a sign of better things to come. By making hard decisions early, they have made job-damaging tax increases less likely and put their states in a better position to benefit from the national economic recovery—assuming it continues.

You can read the entire article here.

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