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.
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.