Republican Governor Hopeful Defends Ohio Tax Plan

Republican gubernatorial candidate John Kasich said Thursday that he has picked a running mate in state Auditor Mary Taylor who shares his commitment to phase out Ohio's income tax to help the state's economy.

Legislative analysts have determined that the 10-year tax phase-out — the linchpin of Kasich's campaign to beat Gov. Ted Strickland in November — would cost state and local governments and libraries more than $12 billion by 2020.

An Ohio Legislative Service Commission report, dated Wednesday and obtained by The Associated Press, found the first year of the phase-out would cost $768 million to the state general revenue fund, $30 million in state aid to local governments, and $16 million to public libraries. Those losses would amount to $79 million to cuts to county, city and township governments and local libraries in fiscal year 2011, the second year of the current state budget.

It took Ohio two rounds of difficult negotiations last year to fill a similarly sized hole.

During an event introducing Taylor to his ticket, Kasich expressed confidence that Ohio could shrink government to that extent without bringing added pain.

"Let me tell you that we will not attempt to phase this out in a manner that is not consistent with being able to modernize the government and dig ourselves out of this hole," he said.

Kasich said tax cuts at the federal level in the 1990s, when he was House Finance chairman, sparked economic growth and government surpluses.

"Our only purpose here is to get things humming again," he said. "And it's not all about cutting. It's about reforming as well, and doing things better and smarter."

In Taylor, Kasich adds gender and geographic diversity to his ticket and the authoritative voice of the state's first CPA auditor on Ohio's economy. Kasich lives in Westerville, outside Columbus, and Taylor is from northeast Ohio.

But Taylor's public attacks on Strickland for balancing his budget using too much non-tax revenue, including federal stimulus dollars and other one-time income sources, may run into a conflict with Kasich's tax phase-out idea on the campaign trail.

In April, Taylor took the unusual step of asking her office to make its own budget projections. The numbers showed that when one-time income sources are gone, the state will need $8 billion over the next two years to balance its budget. Fellow Republicans said that showed Strickland's budget decisions were laying the groundwork for either a hefty tax hike or deep budget cuts.

The legislative analysis of Kasich's tax proposal suggests it would require deep budget cuts as well.

Neither Kasich nor Taylor would address whether their administration would accept stimulus money if offered or use other one-time gimmicks as the income tax was being phased out.

"John and I have a mess," Taylor said. "And we have a mess that we're going to take head on in January when we take office in 2011. We recognize the challenge we have before us, but we also have the credentials and the accomplishments that speak to what it's going to take to transform government so that it costs less so that we can create businesses and create jobs here in Ohio."

Ohio Democratic Chairman Chris Redfern criticized Kasich's tax plan as benefiting special interests and wealthy Ohioans at the expense of "the rest of us."

"There's nothing fiscally responsible about creating insurmountable budget deficits that will devastate our schools, police and firefighters," he said.

Redfern said Strickland's last budget shrunk state government while protecting state support for public schools and higher education and avoiding a tax increase. The spending blueprint did include $850 million gained by postponing a planned tax cut for two year.

According to legislative analysts, annual government losses as a result of an income-tax phase-out would begin at $814 million next year and grow to more than $12 billion by the end of a decade. The commission reviewed the proposal because it's been introduced as a bill in the Ohio House.

Analysts noted it's unclear how the private sector would respond to lower income taxes over time or how the state budget would be affected. Their report said lower taxes might "lead to different choices between income and leisure, encouraging increased economic activity and higher saving and investing," but the analysts were unable incorporate those predictions into their findings.