CHICAGO — Ohio lawmakers Wednesday will begin to consider Gov. John Kasich's budget legislation that would cut income taxes $2.6 billion over three years and offset the costs with increases in taxes on tobacco, business, and oil and gas producers.
Ohio budget director Tim Keen and other cabinet officials were set to appear before the House Ways and Means Committee Wednesday urging them to vote for the legislation, House Bill 472. The proposal will likely be divided into separate bills as it winds its way through the Legislature.
Kasich, a Republican wants an across-the-board income tax cut that would total $2.2 billion over the next three years plus another roughly $460 million of tax credits for low-income Ohioans.
The reduction would lower taxes by all income levels by 8.5% over the next three years, according to the Kasich administration.
The cut would also bring the state's top tax rate of 5.33% to 4.88%, bringing it below 5%, a target goal for Kasich, who faces re-election in November.
The revenue loss would be offset by tax increases that are expected to total $2.4 billion, according to the governor's office.
As the state enjoys a boom in its oil and gas production industry after hydraulic fracking technology raised yields in the Utica shale oil field, Kasich wants to impose a 2.75% tax on the gross receipts from shale oil and natural gas drilling. Kasich's increase would generate $874 million over the next three years.
A similar bill in the House would raise the severance tax to 2.25%.
Kasich's legislation would allow producers to write off $8 million of the gross cost of their start-up drilling costs, and would not tax small conventional gas producers at all, according to the governor's office.
Roughly 20% of the new tax revenue would go to the local governments in the oil and gas-producing regions to help finance infrastructure needs and create a fund for other costs.
The Ohio Oil & Gas Association quickly registered their opposition to the governor's proposal, saying it would have a "chilling effect" on the growing sector.
Kasich also proposed increasing the state's tobacco tax to $1.85 from $1.25 a pack, and extending the tax to other tobacco products like electronic cigarettes. That would expected to generate $850 million over three years, according to local reports.
An increase on the commercial activity tax, which businesses pay on their Ohio-based sales, to 0.3% from 0.26%, would generate $743 million over three years.
"We know what works: balanced budgets, tax cuts, better education and training, and a helping hand so everyone can benefit from a stronger Ohio," Kasich said in a statement. "We've got to keep building on these ideas because they're lifting our state."
The budget proposal sparked criticism within hours of being introduced, with some Democrats saying the income-tax cut disproportionately benefits the wealthy over the poor.
"The governor and his friends don't need another tax break, especially when it's paid for by raising taxes on businesses and lower-income Ohioans," House Minority Leader Tracy Heard, D-Columbus, said in a statement.