Wednesday, November 26th, 2014

Kasich-O-Meter

Phase out Ohio's personal income tax

"Phase out the income tax. It's punishing on individuals. It's punishing on small business. To phase that out, it cannot be done in a day, but it's absolutely essential that we improve the tax environment in this state so that we no longer are an obstacle for people to locate here and that we can create a reason for people to stay here."


Sources:

John Kasich 2010, "John Kasich Live Webcast," Aug. 26, 2009

Subjects: Taxes

Updates

State budget bill reduced income tax rates across the board

If you hear Gov. John Kasich talk about business growth, you"ll almost surely hear him talk about the state"s personal income tax.

 

Kasich campaigned on the promise to eliminate the tax, saying it damages Ohio"s ability to compete with other states when it comes to attracting businesses and growing jobs.

 

"Phase out the income tax. It's punishing on individuals. It's punishing on small business,” he said during a campaign webcast. "To phase that out, it cannot be done in a day, but it's absolutely essential that we improve the tax environment in this state so that we no longer are an obstacle for people to locate here and that we can create a reason for people to stay here."

 

He was more emphatic when he kicked off his gubernatorial bid.

 

"We'll march over time to destroy that income tax that has sucked the vitality out of this state."

 

What he has made clear is that he believes reducing the income tax will aid economic growth in Ohio.

 

The governor included an aggressive plan for reducing the state income tax in the budget proposal he unveiled in February for fiscal 2014-2015.

 

That plan recommended a 20 percent reduction in the state"s income tax rates over three years, and a significant tax deduction for small businesses owners who report their business income on their personal income tax returns. Kasich proposed allowing business owners to deduct up to $375,000 of their business income.

 

Those proposals went through significant changes, though, as the General Assembly debated the legislation that ultimately set Ohio"s budget. But tax relief, as sought by the governor, was included in the final bill, which took effect July 1, 2013.

 

Included in the legislation was a 10 percent across the board cut in all personal income tax rates, phased in over three years. And while the small business tax deduction was scaled back, business owners will still be able to deduct up to $125,000 of their business income.

 

Kasich celebrated those tax cuts with GOP leaders on June 28, 2013, at a gathering at the Ohio Governor"s Residence and Heritage Garden.

 

"I think at the end of the day, people are looking at Ohio," he said then. "Our unemployment is down, Our job growth is up. Our deficits are gone. Our surpluses border on historic. Our tax cuts are another impetus for the growth of the state of Ohio. ... I think that we are standing out as a great state in a great country."

 

But he"s continued to talk about the need to reduce taxes to help sell Ohio, luring businesses and jobs to the state and generating more tax revenue as the economy grows. At an appearance July 18, 2013, in Clermont County in Southwest Ohio, he touched on that theme again.

 

"We"ve got to figure out exactly, region by region and in the state as a whole, what it is that"s going to get people"s attention and have them come here,” Kasich said. "We have momentum (with tax cuts). ... We have to tell them, ‘Take another look at what we have." ”

 

Over three years, the cuts contained in the budget bill will reduce the top tax rate from 5.925 percent to 5.3 percent over three years. Kasich"s goal now, he said July 18, is to reduce that to below 5 percent.

 

"The ultimate destination is lower that income tax as much as we can get, but I keep setting goals. We"ll see if we can get it, if the legislature wants to do more this fall,” Kasich said.

 

"But I"m going to constantly push for it because the lower those taxes are, the better the regulatory climate, and don"t forget, the better we can train our workers, the better position we"re going to be in. And we"ll have a heck of a lot more jobs, a lot lower unemployment, healthier communities, healthier schools, healthier local government, healthier everything. The more that we"re able to create jobs and produce revenue, the better off we are.”

Kasich"s campaign promise was to phase out Ohio"s personal income tax. That hasn"t happened yet, but the budget approved by the Legislature and signed into law takes steps toward that goal.

 

The governor continues to tout tax cuts as part of a means to bolster Ohio"s business climate. And it"s clear that he wants to pursue further rate reductions. Whether he"ll eventually be able to achieve his goal and eliminate the income tax remains to be seen.


For now, though, we can set the Kasich-O-Meter for this pledge to In the Works.

Sources:

Cincinnati.com, "Kasich sets goal of top tax bracket under 5 percent,” July 18, 2013

The Plain Dealer via Cleveland.com, "Kasich signs budget, keeps abortion restrictions, leaves door open for Medicaid expansion,” June 30, 2013
The Plain Dealer via Cleveland.com, "Ohio Senate set to vote on its version of Kasich's budget,” June 28, 2013
The Plain Dealer via Cleveland.com, "Ohio House Republican scrap much of John Kasich"s budget proposal,” April 9, 2013

The Plain Dealer via Cleveland.com, "Ohio House Republican scrap much of John Kasich"s budget proposal,” April 9, 2013

 

The Plain Dealer via Cleveland.com, ”Gov. John Kasich's budget plan unveiled in full as House Bill 59,” Feb. 12, 2013

 

John Kasich 2010, "John Kasich Live Webcast," Aug. 26, 2009

 

State of Ohio, Ohio"s Jobs Budget 2.0

 

State of Ohio, "Cutting taxes through tax reform,” Ohio"s Jobs Budget 2.0


Ohio Capital Blog, "June 1 Kasich for Gov 4,” June 1, 2009

Governor's budget proposal includes income tax cut

John Kasich couldn"t have been more emphatic about his hopes for the state income tax when he launched his campaign.

"We'll march over time to destroy that income tax that has sucked the vitality out of this state," Kasich said during his kick-off event in June 2009 from his hometown of Westerville.

He played up the issue again during a campaign webcast on Aug. 26, 2009.

"Phase out the income tax," he said. "It's punishing on individuals. It's punishing on small business. To phase that out, it cannot be done in a day, but it's absolutely essential that we improve the tax environment in this state so that we no longer are an obstacle for people to locate here and that we can create a reason for people to stay here."

But after taking office, Kasich had other issues on his hands; among them: preparing a state budget proposal that would close a multi-billion-dollar revenue gap.

He did succeed on keeping a related tax promise -- to no longer delay the final year of a five-year, 21 percent income tax reduction that was promised to Ohioans as part of a 2005 tax overhaul. In 2009, Democratic Gov. Ted Strickland – with the backing of the legislature – put that final phase of the tax cut on hold to close another budget hole.

But until recently, with Ohio"s economy struggling to recover from the Great Recession, the governor hadn"t said much about his promise to eliminate the state's income tax – which generates about 40 percent of the state's revenue.
In light of that, PolitiFact Ohio rated his progress on fulfilling his campaign promise as Stalled on the Kasich-O-Meter.

His new budget plan, however, is a move toward fulfilling that promise.

The tax proposal in the governor"s budget plan calls for three successive reductions in the state"s income tax rates. In each of the first two years, the cut would be 7.5 percent. In the third year, there would be a 5 percent reduction in rates.

Taxpayers would save $2.1 billion over the three years, the administration estimates. The change would lower the top marginal rate from 9.925 percent to 4.74 percent.

Kasich"s budget also proposes a 50 percent income tax cut on the first $750,000 of income earned by small businesses. Ohio doesn"t have a corporate income tax. This proposal would benefit business owners whose business income shows up as part of their personal income tax returns.

The administration says that 98 percent of all small businesses in Ohio will qualify for the deduction for all their annual income. It estimates that will result in savings of $1.9 billion to those businesses over three years.

That savings, it says, will yield new capital that can be poured back into the economy in the form of investments into business expansion and the creation of new jobs.

The tax proposals have a long way to go before they can become reality. The Finance Committee in the Ohio House opened hearings on the tax plan on Tuesday. The General Assembly likely won"t approve the state"s two-year budget until sometime at the back end of June 2013.

But the proposals are enough for us to adjust the Kasich-O-Meter. On his promise to phase out Ohio"s personal income tax, we can set the meter at In The Works.
 

Sources:

John Kasich 2010, "John Kasich Live Webcast," Aug. 26, 2009

State of Ohio, Ohio"s Jobs Budget 2.0

State of Ohio, "Cutting taxes through tax reform,” Ohio"s Jobs Budget 2.0

New budget presented, but no movement yet on state income tax repeal

When John Kasich announced his bid for governor in June 2009, he generated attention with his bold pledge to eliminate the state's income tax, which he said makes Ohio unattractive to businesses and residents.

"We'll march over time to destroy that income tax that has sucked the vitality out of this state," Kasich said during his kick-off event from his hometown of Westerville.

He played up the issue again during a campaign Webcast on Aug. 26, 2009.

"Phase out the income tax," he said. "It's punishing on individuals. It's punishing on small business. To phase that out, it cannot be done in a day, but it's absolutely essential that we improve the tax environment in this state so that we no longer are an obstacle for people to locate here and that we can create a reason for people to stay here."

It was one of several promises about shrinking government and taxes the Republican made during the campaign that reflect his conservative politics.

Since taking office in January, Kasich has used his bully pulpit and the political muscle of a Republican-controlled legislature to revamp the state's Department of Development, pass a controversial law that changes Ohio"s collective bargaining rules for public workers and propose a state budget that closes a nearly $8 billion revenue gap.

But 100 days (April 19, 2011) into his administration, Kasich hasn't said much about his promise to eliminate the state's income tax – which generates about 40 percent of the state's revenue. Nor has he floated any proposals to cut it.

His budget plan, however, helps him deliver on the related tax promise to no longer delay the final year of a five-year, 21 percent income tax reduction that was promised to Ohioans as part of a 2005 tax overhaul. In 2009, Democratic Gov. Ted Strickland – with the backing of the legislature – put that final phase of the tax cut on hold to close an $800 million budget hole. Kasich called such a move a tax hike and pledged to unfreeze it.

While Kasich's budget plan does that, it does not advance the goal of phasing out further the state's income tax, even into the second year of the two-year budget plan.

Kasich says he hasn't abandoned the goal and has floated the idea of revisiting the budget next year, which could include tax cuts.

But given the lip service Kasich gave to the issue in the early part of his campaign, the omission is hard to ignore.

That why on the Kasich-O-Meter, we tag this campaign promise as Stalled.
 

Sources:

John Kasich 2010, "John Kasich Live Webcast," Aug. 26, 2009

State of Ohio Office of Budget and Management, ”The Jobs Budget - Transforming Ohio for Growth, Book One: The Budget Book