CHICAGO - Ohio Gov. John Kasich unveiled a two-year
Kasich also proposed raising the state's 5.75% sales tax to 6.25% and expanding it to include some services. He proposed increasing the commercial activities tax to 0.32% from 0.26% and tacking on a $1 to a pack of cigarettes on top of the current $1.25 per-pack state tax.
The increases are aimed to offset income-tax reductions that could cost as much as $1 billion.
In a letter to lawmakers Kasich said his proposal "maintains fiscal restraint and builds on much of the work that we began in the last four years."
His tax reforms would create opportunities for all Ohioans and build "solid, sustained prosperity," he said.
The proposed all-funds 2016-2017 budget, which is Kasich's third spending plan, totals $143 billion. It continues the GOP governor's theme of overhauling the state's tax policy, led by income tax cuts.
The general fund totals roughly $70 billion over two years. The estimated fiscal year 2016 ending balance is $190 million and the 2017 ending balance is $213 million.
The biggest proposed hike is a 6.5% severance tax on oil and gas producers. That would replace a tax that's currently based on production percentages. The measure would generate $260 million through 2017, according to the budget. Kasich has twice made a similar proposal, and both times the lawmakers shot it down.
Kasich also wants to boost K-12 school funding by 6% and revamp the funding formula to take into account a district's income level and allow charter schools to raise more money by tapping a new $25 million facilities fund and asking voters for the ability to levy a tax.
The proposed income tax cuts would eliminate the tax entirely for businesses that make $2 million or less a year -- costing the state about $700 million over two years - and cut income taxes for all Ohioans by 23% in addition to increasing the number of personal exemptions for those earning less than $80,000.
Ohio's current two-year budget, which totals $62 billion general fund, featured the largest tax cut in the state's history, cutting income tax taxes by 20% under the current budget.
The tax cuts could begin to cut into Ohio's structural balance, rating agency analysts have warned over the last year. The double-A-plus rated state could see some pressure from the tax cuts, according to analysts from both Fitch Ratings and Moody's Investors Service.
The Ohio House will begin debating the budget this week.
