Interesting tax reform plan coming out of Ohio from Governor John Kasich:
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.
The plan also calls for simultaneously reducing the sales tax while removing some of the current exemptions from sales tax on the books; in addition to eliminating these carve-outs, Ohio's proposed plan also calls for an increase in "extraction taxes on drilling in the Utica Shale." While this last is probably raising some eyebrows, as the Wall Street Journal points out a lot of energy producing states have discovered that lowering personal income tax rates while maintaining a reasonable extraction tax rate encourages the populace to stay in favor of drilling. This can be useful when the radical Greens show up to start their religious proselytizing.
And as for carve-outs... the brutal truth of the matter is that the government needs some taxation in order to get the revenue it needs to function. Now, I understand that the hard-shelled libertarians shrug at that, and I bless them for being out there and helping to keep the brakes on galloping statism. But for the rest of us? There's going to have to be some taxes, somewhere. And honestly it seems that the best, most equitable way to do it is to keep the rates as low as possible, while extending them as far as possible. As long as you do both.
Anyway, it's unclear whether Gov. Kasich's tax plan will pass: the Left hates the idea of losing income tax rates and the businesses enjoying sales tax carve-outs hate the idea of losing them. So expect a good deal of whining about 'fairness,' from the usual suspects. However, Cleveland.com pretty much sums it up:
Ohio's problem is not income distribution, it is a lack of income. Ohio's personal income per capita is 9 percent below the national average. We don't have enough income, or the jobs that go with it. Economic research is persuasive that lowering overall tax burdens, reducing income tax rates and relying more on consumption-based taxes is good for economic growth. We rejoice in the boldness of the governor's tax plan and hope the General Assembly adopts it.
Guess we'll see.
Moe Lane (crosspost)