Thursday, January 30, 2003

Taft wants to add sales taxes to previously exempt services

By Spencer Hunt and Jim Siegel
Enquirer Columbus Bureau

COLUMBUS - In a continuing attempt to raise more money, Gov. Bob Taft is proposing to apply the state's 5 percent sales tax to commissions paid to real estate agents.

He also wants to charge sales tax on property title searches, rental property management fees and cable TV and satellite dish bills.

All these services are now exempt from the state's sales tax.

The proposals are part of a tax package Taft will ask lawmakers to approve in his upcoming two-year budget plan. The governor is expected to call these new taxes necessary to help fill a deficit that could be as much as $4 billion.

Affected business groups vow to fight the governor. All complained that the proposed tax increases would make it harder for low-income families to pay for products or services.

"We will use every tool and every resource available to us to prevent the passage of these proposals," said Don Freels, chief executive officer of the Ohio Association of Realtors.

"We want to create more opportunities for people to get in on the bottom rung of home ownership," he added. "This will make housing less affordable for those people."

Taft outlined much of his tax package Wednesday to business groups in a late-afternoon, closed-door meeting. He did not comment to reporters and no further details were available.

The governor's office said Taft will discuss a tax plan this morning that will also address ways to lower personal and corporate income tax rates. To make up for lost revenue, Taft is expected to broaden who would have to pay the taxes.

Expanding the sales tax to more goods and services has been under consideration for months.

Vincent Squillace, vice president of the Ohio Homebuilders Association, said increased costs would make buying a home more expensive.

"No business person wants their tax increased in a down economy," Squillace said. "In a weak economy, in some cases, people may not be able to afford your product."

A 6 percent sales commission on a $100,000 house is $6,000. Charging 5 percent sales tax would add $300 to the transaction at closing.

Applying the 5 percent sales tax to a cable bill would add $2.65 to the average $53 monthly bill paid by Time Warner cable subscribers in Greater Cincinnati.

It was not clear Wednesday night whether the additional 1 percent sales tax Hamilton County charges would automatically apply. That would add another 53 cents.

"Obviously, we're opposed to this," said Jennifer Mooney, spokeswoman for Time Warner Cable's Cincinnati Division.

Apartment dwellers could see their rents increase if the sales tax is applied to the fees private companies charge landlords to manage and maintain rental units.

Another part of Taft's tax plan would affect what Ohio businesses pay in annual property taxes.

The state now pays 10 percent of all commercial property taxes. The governor's proposal would cut the state's payment in half, meaning businesses would pay more.

In fiscal year 2000, the most recent year data was available from the Ohio Department of Taxation, the 10-percent commercial property tax rollback cost the state $234 million.

Cutting the rollback in half could save Ohio about $270 million over the next two years.

Taft has already asked lawmakers to double state alcohol taxes and raise cigarette taxes 45 cents a pack to help fill a $720 million deficit in the current state budget. On Friday he called for a 6-cent increase on the state gasoline tax and urged higher fees for driver's licenses, license plates and title registrations to help build and repair highways.

House Speaker Larry Householder, R-Glenford and Senate President Doug White, R-Manchester, have already said they will consider tax increases as a last resort to balancing state finances.

The debate over the governor's tax plans and proposals to cut Medicaid services and eligibility will begin in earnest after Taft introduces his budget on Monday.


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