During last year’s biennial budget process three groups with differing philosophical approaches to public policy came together to call for reform of tax expenditures in Ohio. The Buckeye Institute, The Center for Community Solutions, and The Greater Ohio Policy Center all agreed that it was time to address tax expenditures (often know as “tax loopholes”) and create a process for the review, and possible elimination, of these carve outs.
This effort received a great deal of praise from editorial boards across the state and language to address the issue was even included in the Senate version of the budget. But that momentum has not carried forward and, in fact, legislation creating more tax expenditures has been introduced and passed this year.
Governor Kasich, however, recently made public comments on the issue and the possibility of reform is once again a topic of debate. In light of this, the three organizations today reiterated their agreement on the need to adress this issue.
Our organizations often take different positions on how best to raise and allocate public resources, but we share the common goals of eliminating ineffective, counterproductive or outdated tax expenditures, and assuring that those remaining in Ohio tax law receive periodic scrutiny. Our joint proposal from last year entailed terminating a group of these tax expenditures as part of the biennial budget legislation. We maintain this should be revisited by the General Assembly during its post-election session.
We also recommend that the remaining tax expenditures be subject to “sunset” provisions – that is, that they be scheduled for repeal after several years unless re-enacted by the General Assembly and approved by the Governor. Statutory provisions accomplishing this would include establishing a schedule of sunset dates and the creation of a Joint House-Senate Tax Expenditure Review Committee that would assess the expenditures according to a cost and benefit analysis. Those tax expenditures that fail to prove their benefit would be discontinued while others could be continued with an affirmative vote of the legislature.
All three organizations agree on what Ohio needs: “Ohio needs a reasonable and competitive tax code in order to facilitate the expansion of jobs and to assure the state of the revenue it needs to meet its basic obligations to its citizens.”
But, not surprisingly, we do not agree on what this might look like beyond the specific issue of tax expenditures.
Here at Buckeye we believe that fundamental tax reform is needed and that tax expenditures should be addressed as part of a larger reform effort. Additionally, we believe that effective tax reform means broader, flatter and lower rates.
In fact, we would like to see a discussion of how Ohio can continue to lower its income tax rates with its eventual elimination as a goal. There is a great deal of evidence that in order to compete regionally, nationally and internationally Ohio needs to shed its reputation as a high tax state. States with no, or low, income taxes are growing and attracting jobs and people. Despite its recent good economic news, Ohio is still digging out of a significant hole after decades of growth deficits.
This larger philosophical debate, though obviously important, should not detract from the fact that tax expenditure reform is needed. It should be an important starting point for a larger discussion and we should start that debate now.