Governor John R. Kasich Joseph Testa, Tax Commissioner 1

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1 Governor John R. Kasich Joseph Testa, Tax Commissioner 1

2 $145.0 Ohio Department of Taxation GRF and All Funds Actual Expenditures Comparison FY2010 to FY2013 $135.0 $125.0 All Funds Revenue (in millions) $115.0 $105.0 $95.0 $85.0 $75.0 General Revenue Fund $65.0 FY2010 FY2011 FY2012 FY2013 2

3 Ohio is back on track Ohio is one of nation s top job creators 162,300 new private sector jobs since CEOs survey: Ohio jobs climate most improved in Site Selection Magazine: 4 th Best State Business Climate in the Country. Per capita wages are growing. Rainy Day Fund was 89 cents; now at historic level. 3

4 8.0% Per Capita Personal Income: Year to Year Percent Growth Source: U.S. Department of Commerce; Bureau of Economic Analysis 6.0% 4.0% 2.0% 0.0% % 4.0% 6.0% 8.0% United States Ohio 4

5 Transforming Ohio For Jobs + Growth Fiscal Years State Budget $2.7 Billion Net Tax Cut to Create Jobs and Economic Growth Cut Small Business Income Tax 50% Immediately. Cut Income Taxes 10% over Three Years. Sales Tax Changes. Property Tax Reform. Eliminates Other Exemptions, Credits or Loopholes. 5

6 Business Tax Changes Small Business Tax Cut = 50% of first $250,000 net income = $1.6B over 3 years. Commercial Activity Tax: made Annual Minimum Tax variable. Sales Tax: Raised state rate.25%... expanded base to include Magazine Subscriptions and Digital Goods Ohio now full member of Streamlined Sales Tax Project. Little Cigars : raised wholesale tax rate to the equivalent of cigarette tax. 6

7 Individual Tax Changes Cut Income Tax 10% over three years. Updated Employer Withholding tables. Suspended indexing of PIT brackets and Personal Exemption for 3 years. 7

8 Assistance for Low & Moderate Income Families NEW: Ohio Earned Income Tax Credit (EITC). 475,000 households eligible to take EITC. Retain $20 Personal Credit for households with income below $30,000. Existing low income tax credit = $0 tax for 1.1 million taxpayers. 8

9 Real Property Tax Changes Homestead Exemption: Grandfathered Portable. Indexed to $30,500 for TY Can apply for 2013 thru June 2, More generous than previous program: *Social Security, interest, and pension income not counted in OAGI. *Participant could have household income of more than $51,000. Homestead Now $30,500 (ceiling) 21,045 (avg. S.S., interest, pension) $51,545 (total household income) Manufactured/mobile home tax same changes but take effect in 2015 (must have received exemption in 2014 to grandfather) 10% & 2.5% Rollbacks No subsidy on New and Replacement levies. 9

10 Ohio Government Funding State Keeps for Operations = less than 10% State Debt Service = about 5% State Subsidies = more than 85% Local Government Fund (LGF) cut by 50% in FY 2013 ($694M to $348M). LGF is less than 3% of the direct financial support provided to schools & local governments. 10

11 State Support for Schools and Local Government 2011 ($ 14,075.3) 2015 est. ($ 14,197.2) Sources: Ohio Office of Budget and Management Blue Book All Chart $$ in millions 11

12 Why Pursue Tax Cuts? Governor and leading economists believe cutting income tax will bring long term economic growth. Low taxes foster growth; High taxes discourage it. Ohio s progressive income tax and high tax rates harm job creation. Stay competitive Other states moving to lower rates: North Carolina, Indiana, Kansas. 12

13 10.000% Comparing Maximum Total Income Tax Rates: Ohio v. Surrounding States Tax Year % 8.000% 7.000% 6.000% 5.000% 4.000% 3.000% 2.000% 1.000% 0.000% Ohio Kentucky Indiana West Virginia Michigan Pennsylvania Joint city/school district 2.50% 1.50% School district income tax 2.00% n/a n/a n/a City/county income tax 1.90% 3.50% 2.00% State income tax 5.925% 6.00% 3.40% 6.50% 4.25% 3.07% Notes: Ohio does not have a cap on local or school district tax rates. Special authority is granted to certain cities (Philadelphia, Pittsburgh, Detroit) to levy local taxes in excess of statewide cap. 13

14 Maximum Income Tax Rates Deshler Toledo 10.67% Middlefield 10.67% Kenton 11.4% Youngstown Wyoming Columbus 10.1% Cincinnati Residence Workplace 14

15 Comparison States Combined State & Local Taxes Per Capita FY 2011 T N G A K Y N C T X IN 58.5% 42.1% $2, $3, % $3, $3, $3, $3, % MI $3, W V O H $3, $3, P A $4, $2,500 $3,000 $3,500 $4,000 $4,500 15

16 Comparison States GSP as a Percentage of Ohio GSP TN 54.5% 41.4% GA KY 34.6% 30.1% 86.3% 61.8% 81.5% NC 58.5% 61.4% 91.7% TX 42.1% 44.9% 166.6% 263.4% IN MI 58.1% 48.7% 78.8% 84.9% W V 13.5% 12.2% PA 120.0% 107.9% 0.0% 30.0% 60.0% 90.0% 120.0% 150.0% 180.0% 210.0% 240.0% 270.0% 16

17 Nine States with the Lowest & Highest Marginal Personal Income Tax (PIT) Rates 10 year economic performance ( ) unless otherwise noted % 81.5% 9 states with no PIT* % 44.9% 9 states with highest marginal PIT rate** (includes Ohio) 0 Gross State Product Growth State & Local Tax Revenue Growth *Equal weighted averages ** Source: Laffer Associates, Rich States, Poor States, ALEC

18 Nine States with the Lowest & Highest Marginal Personal Income Tax (PIT) Rates 10 year economic performance ( ) unless otherwise noted % 9 states with no PIT* % 1.68% Non Farm Payroll Employment Growth 5.49% Population Growth 9 states with highest marginal PIT rate** *Equal weighted averages ** Source: Laffer Associates, Rich States, Poor States, ALEC

19 Net loss of AGI Top five states to which Ohio lost AGI Ohio $17.1 billion Cumulative population loss 242, 039 Top state income tax rate 5.93% State local tax burden 9.7% Taxes per capita $3,563 Rank 20 Florida $5.9 billion North Carolina $11.6 billion Texas $1.1 billion South Carolina $1.1 billion Arizona $1 billion From Source: How Money Walks, by Travis H. Brown 19

20 Modernize Severance Tax Advanced technologies and newly discovered resources beneath Ohio s soil has changed the fabric of the state s oil and gas industry. One time Ohio natural resource 40 companies drilling and producing (none are Ohio based). Ohio is lowest in severance tax. $7B committed to Utica shale. 20

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23 Ohio Governor John Kasich: Ohio needs to continue to innovate and implement big ideas This budget keeps our foot on the accelerator 23

24 What s next? 24