Among the media events that took place Tuesday in Lima, Ohio, location of Gov. John Kasich's third and second consecutive remote State of the State Address, were a series of pubic events that featured administration Cabinet members speaking to local officials and business leaders. At the Allen County Courthouse, a couple blocks from Veterans Memorial Civic & Convention Center, where Gov. Kasich delivered his SOTS address, a discussion on tax reform feature Treasurer Joe Testa and Budget Director Tim Keen took place in a small conference room that held about 25 attendees.
Using a PowerPoint presentation to accompany his explanation for Gov. Kasich's drive to reduce income tax rates by subsidizing the reduction with a simultaneous expansion of the sales tax to services hitherto not in reach of this tax, Testa on several occasions said the sales tax portion of the proposal was "relatively complex" and that opposition to it, which he described as vigorous but expected, is something the administration and the General Assembly, controlled by friendly Republican supermajorities in both chambers of the legislature, will necessarily have to think about.
"It's a good point," Testa said to one questioner, who wondered why state government was imposing its control over piggyback sales tax rates in Ohio's 88 counties. The former Franklin County Treasurer, who was elected in 2010 when Republicans swept all Democratic statewide officeholders from office, said that because there are such "unique circumstances" across the state and because there has to be "some predictability to it," meaning the sales tax, the Kasich team arrived at the formula that it did, which Kasich spoke to in his dinner-time remarks.
Timothy Keen, budget director under former Gov. Robert Taft, said the goal has always been to reduce income taxes, an issue then-citizen Kasich said in 2010 that he wanted to eliminate if he could but not until a suitable replacement source of revenue was found.
Taking a sip from a bottle of water, Testa joked with his small group that that drink may have doused any hopes he had for running for vice president, an obviously reference to the latest dust-up over an identical drink taken by Florida's Republican Senator Marco Rubio, who delivered one of two Republican responses to the State of the Union address President Obama delivered to a joint session of Congress a week ago Monday.
Testa and Keen said all this effort, despite the criticism coming from some sectors of the business community and all Ohio Democrats, is to drive down income tax rates. The treasurer stated out right that it's not a recipe for disaster, as he said it was in other states who tried it but stepped later backtracked.
Keen asked and answered his own question: "Why mess with the local tax," he asked the room. His answer was that, in the opinion of Team Kasich, the income tax is more detrimental that the sales tax. Imposing it the way he and the administration has proposed it, over a three year period going forward, starting this year. Keen said the shift is on from the income tax to the consumption tax.
"As complicated as it is," Keen said, it was the "only way to go about it." He spoke of the need for the state to step in to control local sales tax rates as the overriding need to have a "steady-state scenario."
Testa said he couldn't think of a worse state than Ohio when it comes to the burden local taxes impose on individuals and businesses.
Using an example of a Cincinnati company that buys legal services from a Kentucky law firm, Testa said that if the Kentucky firm doesn't collect and remit the sales tax that would be imposed on those services as a result of Kasich's proposal to lower but broaden the sales tax--and federal law prohibits one state from collecting taxes for another--the purchaser of those services, the Cincinnati company, would be expected to pay a use-tax on them, much like the tax Ohioans are supposed tell the state about when they buy online from a vendor in another state.
When asked what the "level of freak-out" to expanding the sales tax, Testa said it was "vigorous" but expected. He said more criticism will come as the proposal makes its way through the legislature. "It's not a surprise," he said.
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