Kasich Touts Tax Reform, Infrastructure Spending
YOUNGSTOWN, Ohio – Gov. John Kasich touted plans last night to cut taxes on individuals and small businesses, in part by raising taxes on oil and gas production, and leverage Ohio Turnpike tolls to raise money for infrastructure improvements throughout the state.
“Jobs are our greatest moral purpose,” Kasich told the assembled members of the state General Assembly at the Veterans Memorial Civic & Convention Center in Lima. The event was the second time Kasich delivered the annual State of the State address, which was also streamed online.
Kasich told lawmakers he wants to modernize the severance tax on oil and gas production to “so that all Ohioans can benefit from the oil and gas discoveries in our state.” Exploration of the Utica and Marcellus shale plays has been a boon in the Mahoning Valley, where landowners have received money for leasing rights and companies have located to service the industry.
Kasich proposes setting a 1% tax rate for natural gas and a 4% rate for oil, natural gas liquids and condensate, except for the first year of production, when the rate would be 1.5%, to allow producers to recover the cost of preparing the well site and drilling the well.
“I know many of you are concerned about” increasing the severance tax, Kasich acknowledged. Under the current severance tax, oil companies only pay 20 cents of tax on a $90 barrel of oil, he said.
“North Dakota has severance tax of 8 or 9%. They’re exploding. They can’t even find enough workers,” he remarked.
Increasing the severance tax would help fund a 20% cut to the personal income tax over the next three years. “Look around the country and see how many states are trying to wipe out their income tax. It’s a race to see who can create the best business climate,” he said.
Ohio’s taxes overall are too high, and “particularly punishing to small businesses,” which Kasich touted as the “engines of job creation.” Lowering the state sales tax from 5.5% to 5% and broadening it to cover more services and industries such as entertainment venues, which he has also proposed, would permit the state to provide a 50% tax cut to small businesses. “These are the people who create nearly 50% of the jobs,” the governor said.
Kasich also pointed to the need to improve the state’s infrastructure to capitalize on the “incredible economic advantage” Ohio’s location affords by leveraging “one of our greatest assets,” the Ohio Turnpike. A $3 billion fund to repair roads, highways and bridges could be created by using the turnpike tolls to take out bonds, funds from which could then be used to leverage federal infrastructure money. The infrastructure work would also create at least 65,000 jobs, he estimated.
Kasich also said expanding Medicare under the Affordable Care Act -- although he does not support “Obamacare” overall -- will benefit Ohioans on many levels. “It’s a chance to rebuild the safety net,” he said.
He criticized the notion of relying on the emergency room as a primary care provider for the uninsured as expensive and not cost effective. During the 2012 presidential campaign, the Republican presidential candidate, Mitt Romney, suggested emergency rooms as a health-care option for people without insurance.
Following the speech, Claudia Kovach, vice president of City Machine Technologies, Youngstown, praised Kasich for “for introducing an innovative proposal to cut taxes” for the state’s small businesses. “Reforms like this drive job creators to hire, invest and grow. It's clear the governor cares about small businesses and wants to see us succeed, not just because it helps us individually but because he knows a strong small business community is good for the entire state,” she said.
The Ohio Petroleum Council applauded Kasich’s speech and said Ohio’s burgeoning oil and natural gas industry is well positioned to advance the administration’s goals of continued economic growth and job creation.
“Ohio’s oil and natural gas industry is a proven game-changer in the state’s economic resurgence,” said Robert Eshenbaugh, legislative analyst for the Ohio Petroleum Council. “The arrival of shale energy development and production in Ohio has brought tens of thousands of new high paying jobs and the promise of a bright economic future for hard working Ohio families. Our industry not only shares the governor’s desire for progress, we are leading the way.”
In 2012, more than 38,380 high paying Ohio jobs were directly attributed to oil and natural gas activity, Eshenbaugh noted. These jobs are expected to increase to 143,595 by 2020 and to 266,624 by 2035, according to a recent study by the global information and research firm IHS.
“We are encouraged by the governor’s focus on shale energy,” he said. “We will continue to work closely with the administration and legislative leaders to advance smart regulatory and economic policies for the benefit of all Ohioans.”
"Kasich hit it out of the park tonight. Once again, he offered a bold and comprehensive budget to further propel Ohio forward,” said Bob Bennett, chairman of the Ohio Republican Party. “Ohio is making a recovery on Kasich's watch as governor. By cutting taxes he continues to send the message that Ohioans are creating jobs again.”
Tim Burga , president of the Ohio AFL-CIO, countered that Kasich’s speech “glossed over” some of the state’s “significant problems” with its economic recovery, including its still “unacceptably high” 6.7% unemployment rate.
“And it doesn’t have to be this way. Layoffs in the public sector triggered by Gov. Kasich’s misguided spending priorities in his first budget remain a drag on our economic situation,” Burga said. Kasich “has proposed to continue his budgeting policies with regard to education and local government funding which will further reduce jobs and impede our recovery,” he continued. Raising state sales taxes by $3 billion “to pay for another state income tax reduction” will hurt middle and lower income working families and small businesses the most, he said.
However, the labor leader commended Kasich for his proposal to expand Medicaid. “This was a wise decision that will create and support many jobs and help many struggling Ohioans. The Ohio AFL-CIO fully supports the governor on this decision and will support the expansion through the legislative process,” Burga said.
The coalition on Homelessness and Housing in Ohio also commended Kasich on the Medicaid expansion.
“It’s smart because not providing coverage means a less reliable, less healthy and less productive work force. It’s compassionate because not expanding Medicaid continues to ignore the needs of some of our most vulnerable citizens. And it’s gutsy because not doing it plays right into the partisan bickering that has gridlocked our country,” said Bill Faith, executive director.
Later this morning, Mahoning County Commissioner Carol Rimedio-Righetti and Auditor Mike Sciortino will hold a press conference to respond to Kasich’s speech.
Copyright 2013 The Business Journal, Youngstown, Ohio.
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