Tuesday, May 16, 2000

Court ruling means tax cut much less likely now in Ohio

Lawmakers instead may do tinkering

By John McCarthy
The Associated Press

        COLUMBUS — Legislative leaders spent Monday discussing tax cuts that seemed likely a week ago but now are uncertain because of the Ohio Supreme Court's ruling that the state needs to do more for public schools.

Plans change
        The 4-3 ruling on Thursday found the state's funding formula remains unconstitutional, primarily because it relies too heavily on local property taxes. The court gave lawmakers until June 15, 2001, to respond.

        Today, the Senate Finance Committee was to vote on the state's $1.8 billion construction plan for the next two years. The bill includes an income tax cut of at least 5 percent if Ohio takes in $380 million above its estimated revenue projections.

        However, Sen. Roy Ray, an Akron Republican who is chairman of the committee, said the tax-cut amendment would be removed from the construction bill. Any proposals promoting tax cuts will instead be heard in the Senate Ways & Means Committee, which has a hearing today on a different tax cut bill, Mr. Ray said.

        Republican leaders in the Senate, which the GOP controls 21-12, say they would prefer to keep the construction bill, which includes millions of dollars in capital projects, free of potentially controversial tax language.

        “This will be a clean-as-you- can-get capital bill with no tax changes in it,” said Mr. Ray, who added he is part of a legislative group studying taxes.

        The court's ruling has lawmakers looking at reducing the reliance on property taxes. The court pointed to that reliance as the cause of disparities in the quality of schools among Ohio's districts.

        House Speaker Jo Ann Davidson, a Reynoldsburg Republican, floated an idea last week that money intended for income tax cuts be switched to property owners. Ms. Davidson acknowledged that schools would get no more money under the plan, but that property owners would lose some of their tax burden.

        Rep. Jeff Jacobson is a Phillipsburg Republican who wrote the income tax cut amendment. He said Monday that he wants to substitute a property tax cut for the income tax cut for this year. He said he wants to try it out as a “pilot project,” then assess the results.

Temporary rollback?
        Mr. Jacobson would increase the property tax rollback for Ohioans to 171/2 percent from the current 121/2 percent. That's the percentage of property tax bills that the state already pays to local governments and schools. However, Mr. Jacobson stressed that the plan as it is now would not be permanent.

        “There's no reason to look at one-time money and say it's a solution to the court decision,” Mr. Jacobson said. “I think there are enough different ways the state could reduce reliance on property taxes.”

        Mr. Ray declined to comment on Mr. Jacobson's idea.

        Leigh Herington of Rootstown is the ranking Democrat on the Ways & Means Committee. He said Mr. Jacobson's plan could help relieve the property tax load on schools, but only if it is permanent and if money is found elsewhere to increase state spending on education.

        “It's not going to go very far if we don't provide additional revenue,” Mr. Herington said.

Deadline looms
        Ms. Davidson said any property tax cut likely would have to be put in place before the Legislature begins its summer recess on May 24, the last session date scheduled before end of the budget year on June 30. If no changes are made, any available money would go for income tax relief.

        “If we don't do anything before we take a break, then it won't happen,” she said.

        The only remedy that appears to be off the table is a tax increase. Last week, Ms. Davidson said there was no support among House Republicans for an increase and Gov. Bob Taft said he wouldn't support one, either.

        Senate President Richard Finan, R-Evendale, added his voice on Monday: “We're certainly not going to raise taxes. I've said that very loud and clear.”

        The Ways & Means Committee is considering a bill sponsored by Sen. Robert Spada, R-Parma Heights. It would increase the personal and dependent exemptions for the income tax and raise the income tax credit for couples who file joint returns.

        The bill also eliminates what the state receives from the estate tax, but it wouldn't affect the part of that tax that goes to local governments.


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