Finally, Ohio to Review Tax Loopholes
Jul 28, 2017It’s about time! Ohio is finally getting prepared to do a deep dive and review the state’s voluminous list of tax loopholes. It is about time. The Buckeye Institute has long been a leader in calling for exactly this type of review so that loopholes are closed and any revenue generated be used for the kind of simple, fair and pro-growth tax reform that is needed to improve Ohio’s economy and grow jobs.
As far back as 2011, The Buckeye Institute joined with think tanks from across the ideological spectrum to call for a detailed review of Ohio tax loopholes. Along with the Greater Ohio Policy Center and the Center for Community Solutions, The Buckeye Institute called for a comprehensive review that consisted of a cost benefit analysis of these loopholes as outlined by the Office of Budget and Management (OBM) in their Tax Expenditure Report. Further, the three groups prepared a list of 20 loopholes that should have been eliminated, which, at the time, resulted in $300 million of lost revenue.
Of course, with new loopholes added since 2011, these numbers undoubtedly are substantially higher than they were six years ago. In fact, OBM’s latest Tax Expenditure Report outlined a total of 129 such loopholes with an estimated $18.6 billion in lost revenue.
Fortunately, at the end of the last General Assembly House Bill 9 was passed, to ensure that a legislative review of these loopholes takes place. Last week, leaders of the Ohio House of Representatives and the Ohio Senate appointed members to the committee created in House Bill 9, and while we are optimistic that the review can yield meaningful results, the panel as created in the bill fell short of ensuring that its hearings and deliberations will do so.
This is because, unlike the proposal supported by The Buckeye Institute and others, there is no automatic sunset for the tax loopholes. Without the pressure of the legislature having to proactively reauthorize these loopholes, it is easy to envision a situation where a report is produced and then subsequently gathers dust on a shelf. All who care about tax reform should work to prevent that outcome.
Reviewing these loopholes isn’t the end of the legislature’s job. While some are publicly calling on the General Assembly to close a wide range of these loopholes in order to raise more money for the state to spend, The Buckeye Institute looks at it quite differently.
Ohio should simplify the tax code and continue moving away from growth hampering income taxes. Further, given the overall good work of the General Assembly in passing one of the tighter budgets in recent memory, now is not the time to gin up the spending machine. The worst thing to do is to increase spending, which sets higher benchmarks for future spending that will make dealing with any inevitable recession a more arduous task.
As the Tax Expenditure Review Committee begins its work it is critical that they eliminate the loopholes that riddle Ohio’s tax code and that the General Assembly focuses on setting a policy of predictable and prudent budgeting to keep Ohio’s spending in check and our tax climate positive for job creation and hard-working Ohioans.
Greg R. Lawson is the research fellow at The Buckeye Institute.