Love him or hate him, Ohio's new fearless leader, Republican Gov. John Kasich, is placing all his bets on supply-side theory to give the Buckeye state a fighting chance at economic growth. In broad terms, Kasich wants to reduce regulatory hurdles and other red tape hindering incentives for businesses to conduct operations in the state. Among many other strategic components in the grand design of Kasich and the Republican legislature, is elimination of the state's $8 billion budget gap without increasing taxes of any kind.
Actually, the very existence of selected tax regimes is at risk in Ohio. For example, the state's estate tax isn't far from the chopping block. The lowest net taxable estate threshold in the country ($338,333) is vilified as the reason so many "wealthy" Ohioans pick up stakes and move to Florida and other tax-friendlier regions. The base Ohio estate tax is $13,900, plus six percent of every dollar that exceeds the minimum threshold, up to $500,000. The rates go up from there. And so the theory goes that when wealthy residents leave the state, their positive impact on the state's economy is also lost forever, leaving the masses to somehow muddle through. Is estate tax elimination is sufficient incentive for Buckeyes to tough it out through Russian winters instead of moving to Florida? There are arguments on both sides. But if the estate tax expires, localities will be the losers as they are now the real beneficiaries of Ohio's estate tax regime.
Most recently this week, Kasich (the "New Governator" in view of Arnold's faded luster?) is floating a franchise tax cut for banks, savings and loans and other financial institutions, now subject to a 13-mill rate based on net worth. That the franchise tax is based on net worth bothers Kasich perhaps more than the rate itself. The idea, of course, is to make it "easier" for financial institutions to extend loans, thereby facilitating economic growth and activity. By the way, most Ohio corporate taxpayers are no longer subject to franchise tax or income tax. The commercial activity tax has been the main menue item for Ohio businesses since 2005.
Naturally, the masses are not exactly thrilled with the idea of cutting the estate tax or financial institution franchise tax while state and local services are being cut and public employees' collective bargaining rights are compromised by recent legislation. On the other hand, of course, the banks like the idea of a franchise tax change as one that could stabilize smaller players in the lending pool and increase the net flow of dollars loaned to stimulate business activity in the state.
Who's right? That always depends on who you ask. For Kasich, the ultimate answer is critical as it would be for any politician. In his case, though, long-range aspirations may lie well above his current place as Ohio's chief.
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