What's Up with Ohio's Proposed Severance Tax Hike on Drilling

by Ann Sanner, Associated Press

COLUMBUS, Ohio (AP) — Republican leaders in the Ohio House pulled many of Gov. John Kasich’s tax plans from his state budget proposal, while announcing more money for schools, a smaller state income tax cut and changes to his poverty and health care initiatives.

The revisions to the Republican governor’s $72.3 billion, two-year spending blueprint come after Kasich’s sweeping tax package drew widespread opposition from business groups and state representatives. They disliked the proposed increases on business taxes, oil-and-gas severance taxes and cigarette taxes along with his sales tax increase and expansion.

The House budget plan removes the governor’s major tax changes and creates a commission to review the proposed increases.

Kasich had wanted to use part of the money from the tax increases to cut the state income-tax rate by 23 percent over the next two years, to a top rate of 4.1 percent by 2017.

The plan from the GOP-dominated House, which would fund state operations for the two years beginning July 1, would provide for a 6.3 percent income tax cut beginning in tax year 2015. That would lower the top rate to just below 5 percent. Representatives also want to make permanent a small business tax reduction passed last year.

House Speaker Cliff Rosenberger said he believed in the governor’s long-term vision, but he wanted businesses to have some predictability in their taxes and have time to know what’s coming.
“Ohio’s doing well,” Rosenberger said. “I don’t think there’s a problem to take this opportunity right now to time out a little bit and let everybody catch up.”

House Finance Chairman Ryan Smith said the revisions trim Kasich’s budget by roughly $775 million, but he didn’t specify where the bulk of the difference occurred. “We went through multiple areas and multiple items.”

The House Finance Committee accepted the changes Tuesday afternoon and was scheduled to take testimony on the revisions the rest of this week.

Responding to the House proposal, Kasich spokesman Rob Nichol said in a statement, “The budget is a long process and we will continue to work with lawmakers to move Ohio forward.”

The Ohio Chamber of Commerce signaled its early support for the direction the House tax changes were taking, as did the Ohio Manufacturers’ Association.

State Rep. Denise Driehaus, the House finance panel’s top Democrat, said some of revisions were positive, but noted her side had little time to review them.

House Republicans also revisited Kasich’s education formula and added $179 million to the governor’s proposed school foundation funding.

His proposal gave less money to more than half of public school districts due to changes intended to better reflect a district’s capacity to raise revenue.

House GOP leaders said their plan would ensure that no district would receive less foundation funding over the next two budget years than it did in the current fiscal year.

Representatives will take a closer look at the governor’s efforts to help tackle poverty.

The House wants to spin out into a separate bill Kasich’s proposal to create a more comprehensive approach to address the needs of people receiving public assistance such as food stamps, childcare support, housing aid or cash assistance.

While House Republicans did not attempt to change the governor’s expansion of Medicaid, their plan would strip the ability of state’s Medicaid director to determine eligibility for the program in the future.

“I would think you’d want some input from the General Assembly on the Medicaid eligibility levels,” said state Robert Sprague, who leads a subcommittee that reviewed Medicaid issues. “Otherwise, we have very little control over the program.”

The GOP majority also want the state’s Medicaid agency to seek approval from federal officials to allow for health savings accounts.

———Associated Press writer Julie Carr Smyth contributed to this report.
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