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Wednesday, February 3, 2010

CUT TAXES, ASK QUESTIONS LATER: KASICH'S "PLAN"

Posted By on Wed, Feb 3, 2010 at 9:00 AM

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Last week, Democrats across the state called press conferences to denounce Republican gubernatorial candidate John Kasich’s tax-cut plan. The stunt coincided with the launch of a website called kasichcuts.com, which shows how much Kasich’s proposal would cost each county.

Dayton City Commissioner Dean Lovelace had the quip of the day. “I thought Darth Vader only existed on film,” Lovelace said, according to the Dayton Daily News. “Obviously, there is a real one in Kasich, coming from the dark side to destroy services. We can’t have this kind of nonsense in the state of Ohio.”

In Cleveland, a small group of city council members warned that Kasich’s plan would suck money from the city's budget and deplete jobs and services. Their message: Don’t mess with Cleveland’s local government fund, which accounts for about 10 percent of the city’s general fund, or $56 million.

Kasich’s plan, while still nebulous, became a bit clearer after state representative John Adams introduced a bill that proposed an income tax phase-out over 10 years. That plan would cost state and local governments and libraries nearly $900 million in its first years, and losses would rise to more than $12 billion by 2020, according to an Ohio Legislative Service Commission analysis.

In Cleveland, says council president Martin Sweeney, every $1 million lost could cost the city 12 police officers or 20 non-safety city employees. Sweeney was joined by Majority Leader Phyllis Cleveland (Ward 5), Jeff Johnson (Ward 8) and Martin Keane (Ward 19). Cleveland dismissed the income tax plan “voodoo economics.” To Republicans, she said, “Poor people don’t matter, working-class people don’t matter. In their mind, you get what you deserve.”

Former congressman, Fox News commentator and Lehman Brothers managing director Kasich called for tax cuts when he announced his candidacy last year. “Under a Kasich administration, Ohioans will benefit from lower taxes, less regulation and responsible spending. I'm determined to phase out the income tax, eliminate the death tax and bring jobs back to Ohio,” he promised.

But the income tax generates an estimated 40 percent of state revenue. Considering the budget agonies Ohio has endured in the past few years as the recession and joblessness have eroded tax collections, that’s an enormous hole in the state budget — and state services. Those library folks who were fuming about the cuts in the last budget haven’t seen anything yet if Kasich is elected and is able to enact his agenda.

On his website, in a section titled “What I Stand For,” Kasich says he’s for “lower taxes — Create a tax climate that allows Ohio to compete with other states to attract new businesses, foster job creation and keep our precious existing jobs here.”

This is faith-based tax policy. There is overwhelming proof that lowering taxes has little to no effect on economic growth. Recall the much-touted “Taft tax cut,” which went into effect four years ago. It was supposed to provide an economic boost to the state, but in that time, Ohio has seen increased job loss. (In December, Governor Strickland signed a bill that delayed the final installment of a cut that would have saved the average worker less than $100.)

Given the fundamental dishonesty of his position, it’s no surprise that Kasich has been vague about exactly how and when his plan would go into effect. Initially, he claimed that income-tax repeal would help pull Ohio out of recession. Then he said that it might have to wait until after the recession, perhaps briefly recognizing the staggering job losses that would result — losses the much-beloved-by-Republicans “private sector” shows no signs of replacing. More recently, he has been talking about a phased-in income tax repeal, perhaps over 10 years, echoing representative Adams’ bill. But lost money is still lost money, and he hasn’t explained yet how he would make up for a 40 percent drop in state revenue, or what programs and services he would cut.

One way is obvious: Many taxes would simply be shifted. Fee increases would certainly occur. Rather than close motor vehicle bureau offices three additional days and increase waiting time exponentially, you’d probably see your auto registration fee double. When schools, libraries, park districts and safety forces in counties, cities and townships across the state are facing crippling service cuts and layoffs, you’ll see more and more levies begging for increases in property and sales taxes.

An article from the Ashland Times-Gazette about an appearance by Kasich at Ashland University reported, “Kasich said real reform takes ‘creativity’ and talked about phasing out the income tax, saying states without the tax — which include Texas, Florida and Nevada — are growing faster than others.”

In fact, all three states have been slammed by job loss and economic malaise. The Ohio unemployment rate for December 2009 was 10.9, while Texas, at 8.3, looked better. However, Florida’s unemployment rate was 11.8, and Nevada was second in the nation in unemployment, lagging behind only Michigan, with a rate of 13.0.

Florida and Nevada have both been extremely hard hit by the housing bust, with foreclosures rates far exceeding Ohio’s and decreases in property values. Florida suffered its first population loss in more than 60 years last year, driven by job loss, rising property taxes and onerous homeowner insurance costs. The state’s heavy dependence on sales taxes makes it financial position precarious.

Ohio can’t afford this kind of “creativity.” — Damian Guevara and Anastasia Pantsios

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