Governor Strickland Fails To Explain Impact Of 2005 Tax Reduction Act On Ohio’s 2009 Budget Shortfall

I’m mystified why Governor Strickland, a Democrat, in analyzing Ohio’s current budget crisis, completely ignores the impact of the Tax Reduction Act implemented via complete Republican domination in 2005.

This Tax Reduction Act was phased in over a five year period. This year, at the same time that Ohio is going hat in hand to the federal government for a hand out, Ohio, as a result of that 2005 law, is giving itself additional tax cuts. The 2005 law cut Ohio income taxes, across the board, by 21% and corporate and business taxes by about 50%.

As with Bush’s tax cuts at the national level, in Ohio, the Republican legislation gave Ohio’s wealthiest citizens the lion’s share of the income tax cut, with 26% of the income tax reductions going to incomes in excess of $340,000.

Governor Strickland in his State of the State Speech implied that the shortfall in Ohio’s budget is completely the result of the recession. But the 2005 tax cuts contribute to Ohio’s budget shortfall as well.

In Ohio’s 2005 Tax Reduction Act Was Predicted, By 2010, To Result In Yearly State Budget Shortfall of Billions, I wrote about a study published in 2005 that predicted that even in a normal economy, the Tax Reduction Act would cause budget shortfalls. The study said, “Massive cuts in state spending, or alternative tax increases, will be required to make up for the revenue shortfall of about $2.8 billion in 2010, the fifth and final year of the tax reform plan’s phase out period.”

The big economic downturn has made Ohio’s budget shortfall worse, but, the fact that now Ohio is experiencing a budget shortfall was predicted in 2005. It appears that part of the overall Republican strategy behind the 2005 Tax Reduction Act was the fact that budget shortfalls, caused by reduced state revenues, would force a shrinkage of government.

Strickland in his speech said, “For the first time in a half century, Ohio’s general revenue taxes have declined two years in a row. We now forecast that the general revenue taxes available to the state of Ohio will be lower in the 2011 fiscal year than they were seven years earlier.”

But not a word about the impact of the 2005 Tax Reduction Act that reduced state revenues by $2.2 billion and of that amount gave $570 million per year to incomes in excess of $340,000.

Strickland in his speech sounded very Republican when he said, “So in this budget, I must ask all Ohioans to accept the sacrifices that these times demand. In order to protect the priorities most important to Ohio’s future, we have no choice but to reduce a significant number of programs and services.”

Strickland is wrong to imply that sacrifices and reductions in Ohio’s programs and services — particularly to the poor — is simply a result of “these times.”

Strickland said, “We will strengthen Ohio by continuing the implementation of the tax reforms of 2005.”  If Strickland wishes to defend the 2005 Tax Reduction Act — including its handout to the wealthy — then he should defend it in an honest way. Strickland missed a good opportunity in his state of the state address to inform and educate the public about the impact this 2005 law has had on Ohio’s current budget shortfall.

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