Gov. Kasich unveils tightened state budget: here's what you need to know

Kasich proposes lower income tax, higher sales tax
Gov. Kasich unveils tightened state budget: here's what you need to know
Posted at 6:00 AM, Feb 04, 2017
and last updated 2017-02-04 08:35:26-05

COLUMBUS, Ohio -- As he’d been doing for weeks, Gov. John Kasich warned this week that the budget he was about to present at the “Building for Ohio’s Next Generation” event would be tighter than in years past.

“This budget is tight but it’s not tight as a lot of families budgets, particularly if they find someone that’s out of work,” Kasich said. “We’ve tried to prioritize things.”

Kasich’s $144.3 billion two-year proposed budget will not only lower income tax rates, but will reduce the number of tax brackets from nine to five. Currently, individuals earning more than 210,500 each year pay a 4.997 percent tax on income. Kasich plan calls for individuals earning more than 200,000 taxed at at a rate of 4.75 percent in 2017 and 4.33 percent in 2018.

“As the governor already said, we believe that income tax is more harmful to job creation and job creators it inhibits investment and savings, and we think that’s the right direction to move in,” said Joe Testa, Ohio Tax Commissioner.

Around 350,000 Ohioans could be exempt from paying state income tax under an expansion of income tax exemption for low-income Ohioans who earn less than $15,000 per year.

In the proposed budget, the sales tax rate is increased from 5.75 percent to 6.25 percent, up by half a percentage point. The budget also expands what can be taxed under the state’s sales tax: cable television, cosmetic surgery, landscape and interior design could all see new taxes under a revised sales tax.

In a press release from the Ohio Senate Democrats, Sen. Cecil Thomas, a Democrat from Cincinnati, expressed his concern with Kasich’s income and sales tax plans.

“I am very upset to see Ohio increase its sales tax yet again in order to continue decreasing the personal income tax,” Thomas said in a press release. “These shifts in tax policies continue to disproportionately benefit the wealthy and disadvantage the lower and middle-class. For the majority of Ohioans, these small income savings do not outweigh the increased cost burden on their everyday necessities.”

Changes to the sales tax would also prevent counties and transit authorities from collecting sales tax on any programs that serve Medicaid patients.

The governor also wants to increase the tax on alcohol, which has been unchanged since 1992. Testa said the increased tax would amount to about a penny increase on a glass of wine or a can of beer.

The tax on tobacco products would also go up, if Kasich gets his way. Currently, a pack of cigarettes is taxed at $1.60, but Kaish wants to increase that tax to $2.25. That’s about a 41 percent increase. The governor also hopes to tax e-cigarettes and other vapor products at the same rate as other tobacco products.

Kasich, a champion of Medicaid expansion in the state, has proposed a $20-per-month premium for childless and nonpregnant individuals on the state’s medicaid program. The state would need to seek approval from the federal government before charging the premium. The governor predicts this change could save the state around $200 million over two years.

The proposed budget would see an increase of about $130 million in K-12 education in 2017 and an increase of $160 million the following year, an increase of about 1.2 and 1.4 percent respectively.

A tuition freeze at public universities that began with the current budget would continue under the proposed budget. Greg Vehr, spokesperson for the University of Cincinnati, said that tuition freeze has presented problems.

“We appreciate the slight raise in funding, but it does not address the fact that tuition and fees have been frozen for the third and fourth years consecutively without sufficient increases in the state share of instruction,” Vehr said. “We also know we cannot raise tuition and cannot find a way to generate new revenue.”

To address the cost of rising textbooks for students, Kasich would have public universities pay the cost of student textbooks. Universities would be able to charge students up to $300 to offset the costs.

Although he says any relief on textbook costs for students is positive, Vehr said he has to see exactly how the textbook program would work before the university could comment.

The Ohio State University is also looking into changes in Kasich’s proposed budget.

“We recognize that these are tough budgetary times, and we are reviewing the specifics of this proposed budget and will be sharing Ohio State’s perspective in the legislative process,” Chris Davey, Assistant Vice President of Media and P.R. at The Ohio State University, said in an email. “We are focused on working together to support access, affordability and excellence in higher education.”

Although Kasich has publicly feuded with President Trump and criticized his administration’s actions as recently as Sunday, he did agree with the president about one thing — the government’s role in regulating the cost of prescription medication.

The governor also wants to impose a 6.5 percent fixed-rate tax on crude oil and natural gas. Currently, crude oil is taxed at 20 cents per barrel and 3 cents per thousand cubic foot unit of natural gas. He said he knows the legislature will likely reject the severance tax, but he continues to include it in his proposed budget in the hopes opinion on the tax will change.

“I don’t believe this legislature is going to enact higher severance taxes, but the day will come when they will, because people will begin to look at it and do comparisons, and let me tell you one other thing," he said. "At some point, some enterprising young politician is going to try to put it on the ballot.”

Kasich wouldn’t take questions about national news, although when asked, he said it was too early to tell if President Trump’s controversial executive order on immigration from seven Muslim-majority countries would have an impact on the Ohio economy.

Connor Perrett is a fellow in the E.W. Scripps School of Journalism Statehouse News Bureau. You can reach him at or follow him on twitter at @connorperrett.