Gov. John Kasich believes that one of the best ways to stimulate economic growth is to cut taxes.
His two-year spending plan for Ohio reflects that. It includes a tax cut for businesses, a 20 percent reduction in individual income taxes, a reduction in the state sales tax and a temporary rollback in local sales tax rates. It also calls for boosting taxes on oil and gas production, targeting an industry poised for growth, and increasing Medicaid access for low-income Ohioans.
The tax cut package, according to Kasich, is aimed at ensuring Ohio remains competitive economically. "We've had too many people that have left this state and taken their wallets with them," he said Feb. 4 as he unveiled his proposed budget.
It's difficult to quarrel with cutting taxes, and the governor, who presumably will seek a second term in 2014, realizes that. At the same time, however, there are legitimate questions to be raised about his spending blueprint.
Kasich's plan appears to assume that Ohio's slowly recovering economy will be robust enough to sustain increased spending at the state level -- general revenue spending is set to rise from $56 billion to $63 billion according to his budget -- and that the increased taxes he is proposing for the oil and gas industry will help shore up the revenues the state will forego if taxes are reduced in other areas. What will happen if this optimistic forecast falls short is left unsaid. Past experience has shown Ohio to be no stranger to giant budget shortfalls when the economy takes a downturn.
Kasich also is calling for a temporary 4 percent income tax cut that automatically will take effect when the state's rainy day surplus reaches $1.5 billion. The fund is expected to hit $2 billion at the end of the current fiscal year. Those who question rolling back state revenues rather than using them for schools, libraries and other programs that have borne the brunt of past state budget cuts have a point.
The governor also would expand Medicaid eligibility for low-income Ohioans, extending it to the "working poor" and those who are seeking work, but with the caveat that the federal government cover the bulk of the costs, as promised. If the government fails to do so, the state won't extend Medicaid coverage. This could present problems in the long run.
John Kasich is an optimist and a booster who believes "a big state like Ohio [is] a major powerhouse in the United States of America." He also is a politician. His budget proposal reflects that, but will the numbers add up?