Tuesday, February 18, 2003

Payers wary of new-tax ideas

Almost all in Ohio affected

By Spencer Hunt
Enquirer Columbus Bureau

COLUMBUS - Spend an extra tax dollar here, another dime there, and pretty soon you're shelling out - $1,474.

That's one way to add up how much Gov. Bob Taft's proposed tax increases would cost a family of four under a broad set of circumstances.

A Cincinnati Enquirer analysis of Taft's plan assumes this Hamilton County family would be unlucky enough to buy almost every item and service the governor wants to tax to balance his proposed $49.2 billion, two-year budget.

That means they'd buy a new house and car to go along with a lifestyle that includes cigarettes, alcohol, cable TV, dry-cleaned laundry, the neighborhood spa, the movie multiplex and family outings to the Bengals' Paul Brown Stadium and Reds' ballpark.

While all that's unlikely, adding up each new taxable item illustrates how sweeping the governor's plan is and how much it could cost.

It also assumes state lawmakers will approve every one of the governor's tax hikes, a prospect that seems less likely each day. In fact, as early as today, legislators may advance a different plan.

  Ohio's budget crisis will take center stage in Columbus again this week as lawmakers look for ways to resolve a $650 million to $720 million deficit in the budget that expires on June 30. Here is a look at what's next.
• Today: Senate Finance Committee is expected to change a $566 million plan House lawmakers passed last week. One version of the Senate plan would raise the state sales 1 percentage point over the next two years.
• Wednesday: The Ohio Senate is expected to vote on the budget bill and send it back to the House.
• Thursday: Gov. Bob Taft's unofficial deadline for the General Assembly to double state alcohol taxes and to increase cigarette taxes by 45 cents a pack to balance the current state budget. So far lawmakers have refused to raise those taxes.
• March 1: The date Taft has threatened to cut state funding to schools if legislators don't increase state sin taxes. The lawmakers' bill attempts to block the governor from cutting any state funds that go to classrooms.
The mere mention of any new taxes is enough to anger several Cincinnati-area residents and business owners, all of whom wonder if the state really needs to dip deeper into their pockets.

Steve Spaeth, a Blue Ash money manager, figures his family would spend an extra $50 a month in new taxes, as long as he doesn't buy a home or car. He thinks state officials could easily cut that much in wasteful spending.

"It's not the dollar amount that bothers me as much as the principle of the issue," Spaeth said. "Why should I have to pay for their inefficiency?"

Taft's spokesman, Orest Holubec, says government has cut as much as it can.

"Gov. Taft has implemented tremendous cuts before asking people to shoulder more of a burden," Holubec said. "We've used all our one-time revenues and the economy is showing no signs of a recovery."

Taft and fellow GOP majority lawmakers must find a way to eliminate a $650 million to $720 million deficit in the current budget that ends June 30. Then they must find a way to raise or cut more than $3 billion to balance Taft's proposed two-year budget, which begins July 1.

The governor's plan would raise $3.1 billion in new tax revenues over two years in part by doubling alcohol taxes and increasing cigarette taxes by 45 cents a pack. It would raise the gasoline tax by 6 cents a gallon to help spend more money on roads and broaden the sales tax to include a laundry list of now-exempt services and products.

Throw in higher fees for fishing licenses and deer hunting permits and Taft's plan would affect nearly every segment of the population.

Sting of taxes

While each increase seems small on its own, they quickly add up.

A family that owns two cars would typically drive a total of 30,000 miles in one year. The additional gas tax would add up to $81.60.

Ohioans who smoke an average 444 packs of cigarettes in one year would pay another $200 in taxes. Higher alcohol taxes would add $10 to average drinkers' costs.

The hypothetical family also would spend another $38 in taxes for a year of cable TV, $12 for residential phone service, $22 for dry cleaning and about $12 more in taxes if they subscribe to Time, People and Sports Illustrated.

The proposed tax on the title search and commission a real estate agent would collect for the average $167,700 Greater Cincinnati home would total $713.

If that family trades in a 1999 Toyota Camry when they buy a new car, they would pay an extra $215 in state sales taxes.

Gary Arthur, a retired city employee and the board chairman of Norwood Christian Academy, said he likes to buy a new car every three years to get the most out of his trade-ins. If a new tax on trade-ins passes, he might hold on to his car longer.

"Being on a fixed income it does make a difference," Arthur said. "With the higher taxes it does impact whether you step out and try to get something better or try to live with what you got."

Bruce Carter, a Colerain Township resident, said the new taxes might cause him to delay some home improvements he's been planning. He said he would be willing to pay some higher taxes, but only if Taft and lawmakers show him deeper cuts to government.

"I'd like to see more cuts than increases," he said.

That demand is echoed by many Republican lawmakers.

"That's a pretty hefty amount," Rep. Bill Seitz, R-Green Township, said about the tax impact analysis.

He said taxpayers who don't want to pay higher taxes must also decide how much less the state government should spend on education, health care and prisons.

"The majority of state government is those three things," he said. "So far, we're hearing from that family of four and they're saying cut spending."

More conservative lawmakers, like Sen. Jim Jordan, R-Urbana, are taking a hard line against any tax increases at all.

"When the decision is between cutting government services and asking families to pay $1,400 more, you make government make the sacrifice," Jordan said.

He didn't flinch at the prospect of cutting money to schools and universities. "You've got to look at all that," Jordan said.

Lawmakers will be encouraged to oppose tax increases by a growing chorus of groups that represent the businesses and services that would be taxed.

Mark Folzenlogen, owner of several A-One dry cleaning stores in Cincinnati and Northern Kentucky, thinks raising Ohio's sales tax will hurt his business and could force some mom-and-pop cleaners to close.

"A lot of people are probably going to take a second look at the convenience versus the cost," Folzenlogen said.

Debbie Celek, owner of Paragon Salons Inc., said her customers pay enough taxes on hair-care products and other items, without the proposed new taxes on massages, manicures and other beauty services. She fears her customers will buy these services less often.

"I think people will want us to bear some of these costs, but that's not something we can do," Celek said. "You can't imagine what our electric bill is."

Holubec said Ohio must expand its tax base to keep up with Ohio's growing service-based economy.

"Our tax base has been eroding. This tax reform package addresses that," he said. "The governor believes it's the most fair way to provide a source of stable revenue."

Lengthy battle ahead

The critical questions of who will pay and how much will take weeks, perhaps months to answer as lawmakers craft a new two-year budget and pass a separate bill to balance the current spending plan.

House lawmakers last week refused to pass Taft's proposed cigarette and alcohol tax hikes to help eliminate the short-term deficit. Senate Republican leaders don't appear likely to pass them, either.

The Senate Finance Committee is expected to pass a bill addressing the short term budget problem today. The bill could include a temporary 1-cent increase to the state sales tax as an alternative to the governor's proposals.

The 1-cent increase could be extended over the next two budget years. If passed, it could bring in $2.5 billion, an amount that would eliminate much of Taft's proposed tax hikes.

Taft hasn't relinquished his support for increased sin taxes or the other broadened sales taxes, Holubec said. Taft has said he would support a temporary increase in the state sales tax if it were imposed immediately.

The governor also set a Feb. 20 deadline to resolve the short-term deficit. If lawmakers don't comply by then, he's threatened to cut school funding to balance the budget.

Although the two-year budgets are typically approved in April or May, lawmakers and Taft have until June 30, the end of the fiscal year, to come up with a plan.

That means Joe Sanfillipo will have to wait and see if he'll have to pay up to $120 in taxes on the Bengals season tickets he buys.

He said he'll probably keep buying the tickets, in spite of the team's stretch of losing seasons.

"If the team we had this year couldn't stop us from buying," Sanfillipo said, "nothing else will."

E-mail shunt@enquirer.com

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