Close Those Loopholes, Kasich!

By Lauren Michelle Kinsey On March 30, 2012 · 5 Comments

We gathered at the statehouse yesterday to demand Governor Kasich review the $7 billion in annual exemptions, credits and deductions that riddle our tax code. Earlier this month, Kasich issued a challenge to the taxpayers of Ohio by saying, “You got any more loopholes you want closed, bring ‘em to us.” In response, One Ohio Now and Fight for a Fair Economy Ohio partnered for a Rally for Taxpayer Fairness. Here’s my video from the event…

Room for Corruption:

Tax loopholes are often special tax breaks that tend to allow the rich to skip out on their responsibility to contribute fairly to revenue for our state. They are often slipped into bills as riders. In a typical scenario, the bill being passed will be a good bill, with enough support that even if someone didn’t like a rider they wouldn’t care about it enough to want to vote against the entire bill. A legislator who wants to give a special favor to a campaign contributor will stick a rider into the bill even though it has nothing to do with the bill. The loophole will become law, unknown to the citizens of Ohio, and it will stay in place forever. There is no review process for loopholes, so the legislators never have to ask the question, “Is this loophole giving us enough value to justify what it’s costing us in revenue?”

A Few Examples of Loopholes to Close:

MEGA-RETAILERS LOOPHOLE – Big retailers receive a discount for collecting sales tax. Most other states with sales taxes either limit the discount for mega-retailers, or don’t have one at all. If we removed this loophole, revenue could increase by $49.4 million in 2012 and $51.6 million in 2013.

RESIDENCY LOOPHOLE –Unlike most other states, Ohio now uses “contact periods” instead of “contact days” to determine residency. It allows high income individuals to spend part of the year in a state with no income tax and avoid paying Ohio’s income tax even though they spend most of the year in Ohio. We could generate $25-30 Million per fiscal year if we close this loophole.

TAVERN TAX LOOPHOLE – Beer and Malt Beverage permit holders receive a tax break for paying their taxes early. If this loophole were eliminated we could generate $1.4 million each fiscal year.

LOBBYIST LOOPHOLE –In 2003, the Taft administration broadened the sales tax by covering a variety of services (dry cleaning, taxi service, etc.,), but a provision including lobbying services was never passed. Seven states (CT, DE, HI, NM, PA, SD, & WA) currently collect taxes on lobbying services and in West Virginia, lobbying services are considered a taxable service under the state’s consumer sales and service tax and use tax.

PRIVATE JET LOOPHOLE – The sales tax on private jet time shares is capped at $800. If we removed this loophole, revenue could increase by as much as $1,000,000 annually.

Tax Expenditures:

What we are calling for is a detailed study of all 128 tax breaks, as well as other items in the tax code that reduce revenues. The General Assembly should create a tax expenditure review committee, which will require a review of these tax breaks every eight years and a review of each new tax break before it is approved. We should also set sunset dates on all tax expenditures so they disappear unless they are specifically renewed. As we review tax issues in Ohio, we must always keep in mind that a fair tax system is one that reduces economic inequality, not one that contributes to it.