Kasich's Income Tax Folly

Ohio Wonder-Guv John Kasich's two-year budget proposal attempts to advance his long-stated desire, his ideological dream:  elimination of the state's income tax.

Knowing that he can't literally get rid of it all at once, for now he'll settle for taking a big chunk.  He wants a 23% cut in the income tax rate to individuals and businesses.  He'll "pay for it" by increasing the state sales tax, frack tax, cigarette tax, and other taxes, and by cutting state spending on education.

(His incomprehensible plan for school funding cuts state aid to more than half of our 600 districts, and has confused and pissed off virtually everyone.  The Wonder-Guv's plan calls for less spending on Ohio public education in 2017 than in 1995.)

Income tax down and sales tax up is classic regressive tax policy, so called because it gives more benefit to higher incomes and places more burden on lower incomes.  It is inherently unfair.  A cut in the income tax rate will have little to no impact on a poor man, but the rich man saves real money.  All sales taxes/consumption taxes are, by nature, regressive.  At any sales tax rate on any given item, a poor man pays a higher percentage of his income on sales tax than does the rich man.  When the sales tax rate goes up, the poor man's proportional share goes up more than the rich man's.  Republicans love regressive taxes.

None more so than Drummer-Boy Kasich.  At last night's State of the State speech, he said, "If we're going to have taxes [if?] . . . they should have the least impact on the private economy."  He said if we don't agree to his income tax cuts, we'll get no economic growth and Ohio businesses will run like scalded dogs to other states with lower tax rates.

Hey, thanks for the blackmail, Guv!  That's your message?  That without ever-lower tax rates, Ohio has nothing in particular to offer?  Tax rate is the only thing that counts?  My dear Governor Kay-suck, if you close the sale only by having the lowest price, you are a poor salesman.  If low taxes were truly the end-all/be-all you say they are, then all businesses in America would be clustered in Florida, Nevada, South Dakota, Texas and Wyoming, because they have no state income tax.  And that doesn't seem to be the case, does it?

The income tax cuts will decrease state revenue by $5.7 billion.  The sales tax/other tax hikes will increase state revenue by $5.2 billion.  That's not "paying for it" -- that's a half-billion-dollar hole!  How might it be filled?  With blue-sky projections, magical thinking, and Tea-bag trickle-down "growth."  Or maybe not.  Ask 'em in Kansas how this new math has been working out for them.  (See the link below.)

(Last night I watched the great movie Being There, in which the imbecile Chance the Gardener dazzled politicians and captains of industry just by saying, "There will be growth in the spring."  They ran him for president.)

Here's the thing -- states have responsibilities.  They're supposed to provide services and do shit, and that takes money.  If you don't want a state income tax, fine, but how will you replace it?  Can you replace it?  (You'd better.  Comin' up a half-billion short won't work.)  Will your method of revenue replacement be fair and equitable, or will you have a riot on your hands?  Maybe you don't really want to replace it and instead just want to slash state services to the bone.  "We'll cut our way to prosperity!"

Maybe you should stop trying to reinvent the wheel and just leave well enough alone.

Let's check out some numbers (data via www.governing.com).

In the 5-year period of 2008-2012, Ohio had net collected total tax revenue of $124.5 billion.  Breaks down like so:

$43.8  billion individual income tax revenue
$1.8    billion corporate income tax revenue
$38.5  billion general sales tax revenue
$24.3  billion selective sales tax revenue (specified commodities, e.g. gasoline, alcohol, tobacco)
$16.1  billion estate, gift, license, severance, and other misc. tax revenue

Individual income tax is the state's single biggest source of tax revenue, and Kasich would like to do away with it.  Actually, he'd like to erase the top two lines, individual and corporate.  How would that deal work?

It wouldn't.  Ohio's tax rates are not the cheapest, but they're far from the highest.  We're middle of the road.  Our current progressive income tax structure, with rates from 0.6% to 5.3%, is fair and equitable and is the most reliable way of providing substantial public funding. 

John Kasich is Chance the Gardener.

Class dismissed.





http://bustergammons.blogspot.com/2014/10/were-losing-money-but-were-making-up.html