Sunday, June 29, 2003

Ohioans brace for bigger hit to wallet

Sales tax hike begins Tuesday

By Spencer Hunt
Enquirer Columbus Bureau

COLUMBUS - Ohio's budget crisis soon will hit us all closer to home.

Almost everything that can be bought - toy cars to Cadillacs, basketballs to boats - will get more expensive starting Tuesday.

Blame it on an increase in the state sales tax from 5 percent to 6 percent.

State lawmakers and Gov. Bob Taft approved the increase to balance the state's two-year, $48.8 billion budget. The extra penny on the dollar will enable the state to raise and spend $2.5 billion before the tax expires June 30, 2005.

Since most counties in Southwest Ohio charge another percentage point, the sales tax will in effect rise from 6 percent to 7 percent. In Butler County, the tax will increase to 6.5 percent.

More bad for Buckeyes: A 2-cent-per-gallon increase in the gasoline tax also starts Tuesday.

Lesley Weingartner, 55, of Springfield Township, said she would boycott Cincinnati stores because of the tax.

"As much as I can, I'll shop in Kentucky," she said. (Kentucky's sales tax is 6 percent.)

"For people in Hamilton County, this is a double whammy, because we've got the additional taxes for the stadium," Weingartner said. "On top of that, they're raising tuition in colleges, and I have a child in college."

These are the first of several waves of higher taxes about to sweep the state.

In August, the state's sales tax will expand to include things that haven't been taxed before - satellite television, taxis, towing, spa treatments and dry cleaning.

In October, it will cost $12 more to renew a driver's license.

In March, Ohioans who like to hunt and fish will pay the state Department of Natural Resouces $4 more for permits.

The new budget also contains more than 100 increases in fees state agencies charge for a range of services and licenses, such as barber licensesand X-ray tube inspections.

Taft and legislative leaders said they had to raise taxes to save vital government programs from drastic cuts.

But Brandon Lynaugh, operations director for the conservative think tank the Buckeye Institute, thinks the higher taxes will make Ohio less competitive and will encourage more young professionals - and their businesses - either to leave the state or not locate here in the first place.

"It just makes Ohio a tougher place to work and live," Lynaugh said.

Zach Schiller, analyst for the more liberal Policy Matters Ohio, supports higher taxes for social-service programs. But he thinks lawmakers raised the wrong taxes, putting more of the state's tax burden on the shoulders of individuals and families.

"This is not the best way to do it," said Schiller.

Schiller and Ohio Democrats supported the original tax plan Taft introduced, which would have, among other things, expanded the state sales tax to more products and services, but kept the rate the same. Taft's initial plan also would have forced corporations to pay up to $700 million more in taxes over the next two years.

Taft's fellow Republican lawmakers largely ignored his tax proposals, saying corporations pay too much in taxes already. Special-interest groups also convinced lawmakers to look elsewhere for revenue.

Ohio Realtors, for example, objected to slapping a sales tax on their commissions. And automobile dealers opposed Taft's plan to tax the value of used-car trade-ins.

Instead of raising $700 million in new taxes from corporations, as Taft wanted, majority GOP lawmakers in the House and Senate went the other way, passing laws that will reduce the property taxes businesses pay to schools and local governments.

Budget documents show reduced taxes on inventory and property, and a change in state-provided property-tax rollbacks will cost schools and local governments about $88 million over the next two years.

Schools struggling to cope with lost funds may seek to increase their property-tax rates.

"The residential taxpayer is really going to be put upon," warns Bill Phillis, director of the Ohio Coalition for Equity and Adequacy of School Funding. The group successfully sued the state over its school-funding system, which the Ohio Supreme Court found relied too much on local property taxes.

Cincinnati Public Schools Treasurer Mike Geoghegan estimates the district will lose $5.2 million in funding next year because of school funding cuts and business tax credits lawmakers included in the budget. He predicts the state's share of CPS' $430 million budget will drop from 40.4 percent to 37.5 percent.

Geoghegan would not say whether the district would ask voters to supply more money.

"We have to look at our spending. We've got a lot of time to plan," he said. "I would just say that this is not helpful, what the state did."

Legislative leaders, such as Senate President Doug White, R-Manchester, said they had no choice. Lawmakers, he said, backed away from cuts to libraries, health care and child-care programs after program advocates protested.

"They were very strongly working the legislative process," White said. "We could never get the cuts that deep, without increasing revenue. We had to do what we had to do."

Conservative lawmakers who voted against the increases said more could have and should have been cut.

"We need to make Ohio a more competitive state," said Rep. Tom Brinkman Jr., R-Mount Lookout. "We're certainly not doing that with all these tax increases."

Some, however, view the sales tax increase as a minor change.

"One percent isn't that bad," said Kathy Goode, 38, of Mount Healthy. "I just try and buy the bargains or wait until some go on sale."

Reporter Andrea Uhde contributed.


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