Ohio Gov. John Kasich is going to focus on state income tax in 2013. His main focus is on more than $7 billion in tax credits, deductions and exemptions the state provides each year.
Gov. Kasich has not been one to hide his intention to further lower the income tax next year, potentially far beyond his proposed $500 million cut funded by a possible severance tax increase that is still stalled in the legislature.
There is a lot of talk that the governor has set a goal for a “huge” state income tax cut paid for, in part, by limiting tax “loopholes” — which primarily are exemptions from the state sales tax. Of the $7.8 billion the state would forgo in tax expenditures next year, about $5 billion would come from sales tax exemptions.
Gov. Kasich recently said, “We’re always working to figure out how to lower the income tax, and it will involve tax reform. I can tell you that when we engage in tax reform there will be a lot of squeals and a lot of howls from people that want to be for the status quo.”
Gov. Kasich’s current proposal to boost taxes on shale drillers and cut the income tax would amount to a 5 percent cut after a few years. In 2005, Ohio phased in a five year, 21 percent cut in income tax rates at the rate of 4.2 percent a year. With the 2005 phase complete, the current Ohio income tax rate is 5.925 percent.
The most recent version of The Tax Expenditure Report, prepared by the Ohio Department of Taxation, has a list of tax exemptions and the State of Ohio 2012/2013 expenditures.
We will continue to monitor the situation and bring you updates as they become available. If you have questions on Gov. Kasich’s tax plans, please contact your Bruner-Cox LLP engagement executive, or , State and Local Tax Leader, at 330.497.2000, ext. 4129.