Kasich’s Plan — To Use Ohio’s “Fracking” Windfall For Tax Cuts — Is A Give-Away To Wealthy

A recent Dayton Daily News article says, in Ohio, signs point to a future where extracting natural gas by hydraulic “fracking” will generate $500 million, or more, each year in additional tax revenue from Ohio’s natural gas industry.

How should Ohio use this new revenue?

The DDN reports that Governor Kasich wants to use this windfall to make an “across-the-board” tax cut. The Kasich plan would give most of this revenue to wealthy incomes and very little to middle or low incomes. As Zach Schiller says in a Policy Matters Ohio article, “Middle-class Ohioans wouldn’t get enough for a tank of gas.”

Table prepared by Policy Matters Ohio

This table from Policy Matters shows that 25% of the tax cut Kasich is proposing would go to the top 1% of incomes, while the lowest 80% of incomes would have only 30% of the tax cut to share.

As demonstrated by the Bush tax cuts and by Ohio’s 2005 Tax Reduction Act, across-the-board cuts in income taxes lessens the progressivity of the tax code. If it is good public policy to use the $500 million per year additional tax revenue in Ohio to reduce income taxes, this $500 million could be distributed in such a way as to improve the progressivity of Ohio’s tax system.

Rather than dividing this $500 million yearly windfall so that the top 1% of incomes gets, on average, $2313 and the lowest incomes, on average, get $2, as I figure it, if the $500 million was evenly divided among taxpayers, each taxpayer would get about $95. Such a division would make the tax rates more progressive and would be a bigger stimulus to the economy.

But does it make sense to enact tax cuts right now? The reality is that just last year, the Kasich budget was balanced by cutting over $2 billion each year in state payments to local governments and local schools. Rather than using the $500 million windfall for tax cuts, it would seem that Kasich should explain why it doesn’t make more sense to use the money to restore some of these cuts to local communities.

Previous Articles:

1. Solutions To Ohio’s $8 Billion Budget Gap Should Be Focus Of Ohio Assembly Election Campaigns — July 20th, 2010
2. Ohio’s Budget Crisis: Ohio Must Find A Way To Make Its Total Tax System More Fair, More Progressive — December 17th, 2009
3. How Much Revenue Would Ohio Gain, If Ohio’s 2005 Tax Reduction Act Was Rescinded For Top Incomes? — March 31st, 2009
4. Governor Strickland Fails To Explain Impact Of 2005 Tax Reduction Act On Ohio’s 2009 Budget Shortfall — January 28th, 2009
5. Ohio’s 2005 Tax Reduction Act Was Predicted, By 2010, To Result In Yearly State Budget Shortfall of Billions — December 15th, 2008
6. Assembly Candidates Should Take Stand: Will Ohio Raise Taxes Or Will Ohio Cut State Services? — October 25th, 2008
7. Twelve Tax Loopholes Ohio Should Close To Generate $270 Million Additional Revenue Each Year — October 15th, 2008
8. Chris Widener, Republican Senate Candidate, Boasts About Tax Cuts, But How Will He Solve Ohio’s Budget Crisis? — October 8th, 2008
9. Ohio’s 2005 Tax Reduction Law Diminished, By 21%, The Progressivity of Ohio’s Tax Code — August 6th, 2008
10. Study Says Ohio Should Raise State Revenue $817 Million By Revising 2005 Income Tax Reduction Act — August 4th, 2008