Legislators to examine tax breaks
Ohio has 128; critics dispute value of some
With an eye toward the next two-year state budget, Senate President Tom Niehaus says it’s time for a thorough review of the billions of dollars in state tax deductions, credits and exemptions given to Ohio citizens and businesses each year.
The New Richmond Republican has assigned his Ways and Means Committee to hold hearings and craft a report this fall on the so-called state tax expenditures that will cost Ohio $15 billion in forgone revenue in the current two-year budget.
“If we wait until March of 2013 to have the discussion, we’ll run out of time,” Niehaus said. “ Do they make sense? Are they doing what they were intended to do? Do we need to eliminate them? We’r e also looking at all of those programs as they relate to job incentives.”
Groups across the political and social spectrum have called for such a review.
In May, the conservative Buckeye Institute, liberal Center for Community Solutions and moderate Greater Ohio Policy Center joined to propose eliminating tax expenditures totaling $300?million a year. They also called for a “sunset” provision under which all tax expenditures are repealed unless re-enacted by the legislature and governor.
The liberal-leaning Policy Matters Ohio and business-friendly groups such as the Ohio Chamber of Commerce and Ohio Society of Certified Public Accountants also have called for a review of the state’s 128 tax exemptions, credits and deductions.
Niehaus tried to create a committee to study tax expenditures in the new two-year budget, which took effect July 1, but it was pulled out at the request of House GOP leaders. Niehaus said House leaders argued that each chamber already has committees that can study it. He said that was a fair point, “but for 20 years, we haven’t done it.”
Digging into state tax expenditures is sticky political territory. While they cost state government huge sums of money, every deduction, exemption or credit was created for a reason — often at the request of politically influential special interests.
Some of the biggest tax expenditures are unlikely to be touched, such as the sales-tax exemption on prescription drugs ($1.2?billion over two years); state income-tax deductions for spouses and children ($1.1?billion); and an income-tax exemption on Social Security benefits ($550 million). But there are dozens of other options to choose among.
“Some of them make good sense. Some of them are, on their face, preposterous,” said John Begala, executive director of the Center for Community Solutions, pointing to a sales-tax exemption on partially owned private jets.
Sen. Tim Schaffer, R-Lancaster, chairman of the Senate Ways and Means Committee, said he first plans to call Begala and the leaders of the Buckeye Institute and Greater Ohio to talk about their plan, which includes doing away with the $20 personal income-tax credit that is given to every Ohioan just for being alive, and a $50 credit for contributions to political campaigns.
Schaffer said he hopes to start the committee in October, depending on when Senate sessions are scheduled. He said he doesn’t want to bring people to Columbus just for Thursday committees.
He did not point to specific tax expenditures he thinks are questionable.
“My personal goal is to make sure there is still some usefulness in the tax expenditures,” he said.
A new House study committee also has been meeting around the state to review not just tax expenditures but the entire state tax structure. The committee is supposed to issue a report this fall.
“Good ideas are hard to resist,” Begala said. “When you get organizations as diverse in their interests as ours, I think it’s worth people paying attention.”
He likes that lawmakers are examining tax expenditures outside the budget process.
“It will allow us to look at these objectively and think about what are reasonable criteria for judging the utility of these things, independently of having to balance the books.”