Columbus, OH – The Buckeye Institute’s Greg R. Lawson testified today (see full text below or download a PDF) before the Ohio House Ways and Means Committee, highlighting the ways that tax credits and exemptions cost Ohio and Ohioans money, and how they complicate the state’s tax code making it more difficult for taxpayers to fill-out their returns. 

After outlining how the Ohio Department of Taxation defines a tax expenditure, Lawson stated Buckeye’s long-held position on these types of exemptions saying, “The Buckeye Institute has long opposed most tax expenditures, including credits and exemptions, because of their adverse impacts on taxpayers and the level playing field on which a free market depends.”

Citing research from the Tax Foundation, Lawson went on to highlight the particular problem exemptions place on counties located on Ohio’s borders. “Adopting too many sales tax exceptions risks forcing some counties to raise their tax rates, which will in turn make them less competitive…and higher rates could prove an even greater competitive disadvantage for counties along our borders.”

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Interested Party Testimony on House Bill 337
Before the Ohio House Ways and Means Committee

Greg R. Lawson, Research Fellow
The Buckeye Institute
February 20, 2018

Chairman Schaffer, Vice Chair Scherer, Ranking Member Rogers, and members of the Committee, thank you for the opportunity to testify today regarding House Bill 337 and Ohio’s tax policy.

My name is Greg R. Lawson. I am the research fellow at The Buckeye Institute, a free-market think tank here in Columbus that advocates for low-tax, low-regulation policies that remove barriers to prosperity for Ohioans.

According to the Ohio Department of Taxation, a tax expenditure is any tax policy that has the following four characteristics:[1]

• The item reduces, or has the potential to reduce, one of the state’s General Revenue Fund taxes;
• The item would have been part of the defined base;
• The item is not subject to an alternative tax; and
• The item is subject to change by state legislative action.

The Buckeye Institute has long opposed most tax expenditures, including credits and exemptions, because of their adverse impacts on taxpayers and the level playing field on which a free market depends.

As exceptions to the tax code, tax expenditures effectively narrow the tax base. The narrower the tax base the higher and more confiscatory taxes become for those still subject to the tax. Thus, tax expenditures, however unintentionally or well-intended, eventually pick economic winners and losers through their preferential treatment under the law.

Flatter taxes, by contrast, levied on broader bases and without special exemptions, lower the tax burden and spread the cost of the tax more evenly and fairly among taxpayers.

Additionally, adopting too many sales tax exceptions risks forcing some counties to raise their tax rates, which will in turn make them less competitive. According to the Tax Foundation, Ohio already has the highest average combined state and local sales tax rate among its neighbors, and higher rates could prove an even greater competitive disadvantage for counties along our borders.[2]

Tax policies that may put more of our counties at a greater disadvantage is not sound tax policy for Ohio.

Thank you again for the opportunity to testify today. I would be happy to answer any questions that the Committee may have at this time.

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