Wednesday, April 30, 2003

Ohio budget: 'Temporary' confusion

Real tax reform needed

In recent weeks, we have criticized the Ohio House's proposed "temporary" one-cent sales tax hike, in part because temporary taxes have a habit of becoming permanent. Well, now it appears the hike could become permanent before it's temporary. Or it could become "semi-permanent."

On Monday, Gov. Bob Taft met with three bond rating agencies in New York. The sessions confirmed the obvious: The figures simply don't add up in the House's 2004-05 budget plan. It lacks definite spending cuts and stable revenue sources. If it's not fixed soon, the firms may lower the state's bond rating - costing Ohio tens of millions of dollars a year.

So Taft told reporters the state needs a long-term solution, even if that means a permanent tax hike. "If they do a sales tax increase, he would prefer it be permanent and part of meaningful tax reform." Taft spokesman Orest Holubec said Tuesday.

If that happens, don't blame Taft. In January, he proposed a comprehensive reform of Ohio's tax structure to broaden the sales tax base, simplify the system, and bring in more revenue without raising tax rates - in fact, lowering income tax rates. It would help Ohio adapt to the 21st century economy's shift away from goods and toward services.

It was a smart and savvy plan, but the House dumped most of it - and replaced it with a batch of half-measures, including a Rube Goldberg contraption in which a conditional sales tax hike would go away if voters pulled a lever that rolled a steel ball down a chute and triggered the racetrack video lottery terminal trap door.

Now it's the Senate's turn. Finance Chairman Bill Harris, R-Ashland, says his committee is looking at a "semi-permanent" sales tax hike, whatever that means. Taft is meeting daily with senators, trying to reinstate as much of his plan as possible - especially business and income tax reforms. "The governor still is for the proposal he put forth in his budget," Holubec said, "(but) he has been showing flexibility in the sales tax."

Critics may say Taft is swinging the cudgel of a lowered bond rating to put political pressure on legislators. Good. If they'd adopt his reforms, restrain spending and end tax-loophole abuse, there would be no need for a sales tax hike - temporary, permanent or semi-permanent.

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