Ohio GOP: More Tax Breaks For Rich Business

[sfc_oliver]

So giving small businesses that are hiring new people or moving into vacant buildings (expanding) a tax break will mean lower tax revenue?

I don't think so, since without the incentives they may not hire or may not expand.

Of course, I can only go off of what history has shown us.

[Rick Rowlands]

I am not talking beliefs, I am talking facts. 

[irishbobcat]

whatever you want to believe,Rick.....

I'm just tired of arguing with you  neo-cons.......

[Rick Rowlands]

I'm amazed at how quickly my post shut up the libs.  Still speechless after reading the facts no doubt.

[Rick Rowlands]

Such a haphazard cut and paste (in violation of copyright law I might add), that Dennis couldn't even be bothered to cut off the crap at the bottom!  Now on to the oh so easy refutation of this article:

"It is often assumed that broad cuts in income tax rates
only benefit the rich and thrust a larger share of the tax
burden on the poor. But detailed Internal Revenue Service
data show that the across-the-board rate cuts of the early
1920s–including large cuts at the top end–resulted in
greater tax payments and a larger tax share paid by those
with high incomes."
http://www.cato.org/pubs/tbb/tbb-0302-13.pdf

"The criticism that the tax payments of the rich would fall under ERTA was based on a static conception of human behavior. As a 1982 JEC study pointed out,[1] similar across-the-board tax cuts had been implemented in the 1920s as the Mellon tax cuts, and in the 1960s as the Kennedy tax cuts. In both cases the reduction of high marginal tax rates actually increased tax payments by "the rich," also increasing their share of total individual income taxes paid. Unfortunately, estimates of ERTA by the Democrat-controlled CBO continued to show falling tax payment by upper income taxpayers, even after actual IRS data had become available showing a surge of income tax payments by affluent taxpayers. "
http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm

Unfortunately, tinkering with the tax code seems to be irresistible to almost all politicians.  In addition, raising taxes on the 'rich' is a populist theme many politicians have adopted.   This idea is widespread even though there is a very good chance that higher tax rates will not lead to higher tax revenues.  Our political leaders often misunderstand the long-term consequences of tax law changes and they advocate policies that bear little or no relationship to economic reality.

"As you can see from these charts, soaking the rich by raising tax rates generally does not work.  And, there can be collateral damage in that high tax rates almost always reduce economic activity which hurts everyone.  If the goal is to maximize economic growth and generate adequate tax revenues, we know what makes sense."
http://blogs.marketwatch.com/fundmastery/2010/07/02/does-hiking-tax-rates-raise-more-revenue/

Myth: Lower tax rates will mean that the rich pay less.

Reality: This outcome depends on how much tax rates are reduced. History indicates that the revenue-maximizing rate is less than 30 percent.2 In other words, when marginal rates are higher than 30 percent, the rich probably will pay more taxes if rates are lowered. The reason? There is less incentive to hide, shelter, or underreport income.
http://www.heritage.org/research/reports/2001/03/the-truth-about-tax-rates-and-the-politics-of-class-warfare

[irishbobcat]

By Jim Siegel

Despite facing an impending two-year budget shortfall that could top $8 billion, House Republicans are taking a serious look at enhanced tax breaks for businesses that could provide more jobs but also would dig the budget hole even deeper.

Republicans recaptured control of the House and hit the ground running last week, introducing bills that would give businesses more money for collecting state sales taxes, tax credits for hiring unemployed people, and tax breaks for moving into vacant buildings.

The specific budget impact has not been analyzed, but the nonpartisan Legislative Service Commission estimated that potential lost revenue could reach hundreds of millions of dollars or more.

Speaker William G. Batchelder, R-Medina, acknowledged last week that some of the proposals might have to wait for Gov. John Kasich's two-year budget, which will be introduced by March 15.

"We will probably have to pass those bills, if they get to final passage, with the idea that we may not be able to pass them in the (Senate), due to the fact that we'll have the governor's budget," he said. "It's totally unfair to (Kasich) to start spending money we may not have."

But with Ohio hemorrhaging jobs over the past decade, Republicans are eager to do more to entice businesses to expand or move their operations into Ohio.

"We know what mandates, regulations and taxes do to small businesses and how it hinders us sometimes when we consider hiring because of the added cost," said Rep. Nan Baker, a Westlake Republican and business owner who is sponsoring two of the newest tax bills.

Baker said she hears the pushback about diminishing budget revenue. "It's foreign to me to hear that. If we don't hire or if they go elsewhere and we can't attract jobs here to Ohio, we get zero."

But Democrats wonder whether the bills do more harm than good by creating a larger budget hole.

The state first needs to do more to determine whether its current tax credits are creating jobs, "rather than throwing money away - money that is currently being used to help local governments and this state's most vulnerable populations," said Rep. Tom Letson, D-Warren, the ranking minority member of the Ways and Means Committee.

Former Ohio Attorney General Richard Cordray issued a report this month noting that the state often fails to take action when companies don't create jobs in return for tax credits and other benefits, and Ohio struggles to track whether companies comply with their agreements.

"We've been adding tax credits for decades," said Jon Honeck, director of public policy for the Center for Community Solutions. "It doesn't mean that all tax credits are bad, but I don't see them as a silver bullet in any way."

House Bill 3 would eliminate Ohio's estate tax, which is paid on estates valued at more than $338,333, costing the state about $60 million a year and local governments nearly $250 million a year. Republicans call the tax unfair, but local officials say it will hurt services and could be compounded by future cuts to local government funds from the state.

House Bill 17 would give employers up to a $2,400 tax credit for each person hired who had been unemployed for at least the four prior weeks.

A Legislative Service Commission analysis said it would potentially cost the state $1.5 billion spread over multiple years.

House Bill 18 would give income-tax or commercial-activities tax credits to businesses that increase payroll and move their operations into vacant facilities. The Legislative Service Commission last year estimated the bill would result in an unspecified net revenue loss for the state, because while it may entice some new companies to Ohio, it could induce others to simply move within the state.

Baker, sponsor of the two tax-credit proposals, said she disagrees with the cost estimates, particularly for the unemployment credit. She said an average worker contributes $1,400 a year to state revenue, and the credit is $2,400 over two years.

"You are not going to hire someone because you get a tax credit," she said. "But we are asking that businesses consider hiring an unemployed Ohioan, because not only do you give that person a job and he becomes a contributing member of society, but you get him off the social services that every employed Ohioan is paying for."

House Bill 8 would increase what the state pays vendors for the timely collection of sales taxes, from 0.75 percent to 5 percent of taxes collected. It also creates a new 5 percent discount for income-tax withholdings.

The current sales-tax discount costs state and local governments about $60million a year, according to the Ohio Department of Taxation.

The department said the bill as written, with a $10,000 cap on total discounts, would benefit about 98percent of Ohio vendors. The top 2 percent, consisting largely of big-box retailers, collect about 75 percent of all sales taxes in Ohio.

The cap drew heavy fire from the Ohio Council of Retail Merchants. Bill sponsor Rep. Terry Blair, R-Dayton, listened and is already pledging changes that would allow businesses to collect sales-tax discounts above $10,000 at a rate of 0.75percent.

Former Gov. Ted Strickland in 2007 proposed capping the discount at $30 a month, arguing that technology has made it cheaper for businesses to collect the sales tax. Retailers disagreed, and lawmakers settled it back at 0.75 percent.

The state has never given a discount for income-tax withholdings. A 5 percent sales-tax discount would be the highest rate in the nation - and about half of states give no discount.

"I think that would be a boon for smaller businesses," Blair said. "Like anything else, there is going to be a cost associated with this, but I think it will be a benefit for the economy because small business will start to feel a little more secure in what they're doing."

jsiegel@dispatch.com