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Unloved GOP Tax Plans

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John Kasich’s budget went up in flames this week when House Republicans gutted every one of his major initiatives. It follows the crash and burn of Bobby Jindal’s similarly extreme plan earlier in the week.
Here’s the truth: John Kasich and Bobby Jindal’s tax proposals showed they are too extreme for the people of their states, including the small business owners and lawmakers in their own party who helped sink them both. 

Columbus Business First Headline: “Ohio House Republicans Reject Kasich Plans for Medicaid, Sales Tax, Frack Tax, Small-Business Tax Cut.” “Leaders in the GOP-controlled House on Tuesday outlined how they are dumping Kasich’s bid to expand Medicaid coverage to an additional 275,000 Ohioans. They also are removing his plan to broaden the state sales tax base, axing his proposal to raise severance taxes on oil and natural gas drilling operations, and replacing Kasich’s 50 percent income tax reduction for small-business owners with a 7 percent income tax cut for all wage earners.” [Columbus Business First, 4/9/13]
 
Columbus Dispatch Headline: “Kasich’s Tax Proposals, Medicaid Expansion Out in House GOP Plan.” “Legislative Republicans rolled out a plan today that eliminates most of Gov. John Kasich’s tax proposals in his two-year, $63.3 billion budget. House GOP leaders threw out Kasich’s tax cuts and replaced it, for now, a 7 percent income tax cut. It would be a $1.5 billion cut over two years.” [Columbus Dispatch, 4/9/13]
 
Plain Dealer Headline: “Ohio House Republicans Scrap Much of Gov. John Kasich’s Budget Proposal.” “Ohioans would get an immediate 7 percent income tax cut under the budget bill that Ohio House Republicans unveiled this afternoon. The cut replaces a 20 percent phased-in reduction that Republican Gov. John Kasich had proposed… Also dumped from Kasich’s proposal was a 50 percent income tax cut for small-business owners, a sales tax overhaul that would have lowered rates but expanded the tax to a wide array of services, and a revamped severance tax that would bring in more money from oil and gas drillers. The House proposal does not change the state sales tax rate of 5.5 percent.” [Plain Dealer, 4/9/13]
 
Toledo Blade Headline: “Ohio House Republicans Make Major Changes to Kasich’s Proposed Budget.” “The revised two-year budget, about $2 billion smaller than Gov. John Kasich’s $63.3 billion proposal, cuts personal income tax rates across the board by 7 percent a year, a cut of $1.5 billion over two years. The House GOP plan counts on continued growth in existing tax revenue sources as well as nearly $400 million in surplus funds that Mr. Kasich had planned to give back to taxpayers next year in the form of a tax rebate.” [Toledo Blade, 4/9/13]
 
TPM Headline: “Ohio Republicans Move To Block Gov. Kasich’s Medicaid Expansion.” “Ohio Republicans in the state legislature intend to block Gov. John Kasich (R) from expanding Medicaid under Obamacare. A key Republican-led House panel is set to nix $13 billion in federal funds budgeted to expand Medicaid to some 300,000 Ohioans, according to the Associated Press and Columbus Dispatch.” [TPM, 4/9/13
 
10TV Headline: “GOP-Controlled Ohio House To Strip Medicaid Plan From Kasich’s Budget.” “Ohio House Republicans are about to deal Gov. John Kasich a big setback to his proposed state budget. The governor’s plans to expand Medicaid under the federal health law won’t be included in the Ohio House version of the state’s two-year budget. [10TV.com, 4/9/13]
 
Cincinnati.com Headline: “GOP Leaders Take Medicaid Plan Off Budget.” “Ohio’s Republican leaders have stripped Gov. John Kasich’s proposed Medicaid expansion from the two-year budget, positioning the state to take a pass on $13 billion in federal funds that would have extended health coverage to more than 300,000 Ohioans with no insurance.” [Cincinnati.com, 4/9/13]
 
StateImpact Headline: “Ohio House Moves Away from Kasich’s School Funding Plan.” “As it turned out, the Governor’s description of his plan didn’t fit with the numbers. Projections showed many poor districts would not get an increase, while many districts that are well off would see more in state aid – sometimes a lot more. Now, the Republican controlled House has come up with its own formula.” [StateImpact, 4/9/13]
 
House GOP Dropped Kasich School Funding Formula. “House leaders also set aside Kasich’s school funding plan in favor of a retooled “Building Blocks” funding model applied during former Ohio Gov. Bob Taft’s administration. The model sets a base funding amount and supplements those dollars based on the wealth of each district.” [Plain Dealer, 4/9/13]
 
Canton Repository Headline: “Ohio House Trims Kasich Income-Tax Cut to 7 Percent.” “The Ohio House has preserved a portion of the statewide income-tax cut proposed by Gov. John Kasich in its version of the state operating budget, marking a partial victory for the Republican governor. House budget changes released Tuesday included a 7-percent income tax reduction over two years. That compares to a 20-percent reduction over three years that had been proposed by Kasich…The governor’s $63.2 billion, two-year budget paid for the cut with a tax increase on oil and gas extraction. The House has pulled that proposal, along with Kasich’s proposed expansion of the sales tax to professional services.” [Canton Repository, 4/9/13]
 
House Republicans Expected to Gut Kasich Tax Plan. “House lawmakers were expected to remove the Republican governor’s proposed tax hike on oil and gas drillers and sales taxes on professional services. And they want to significantly rewrite his proposed school-funding formula.” [Associated Press, 4/9/13]
 
Amended Budget Eliminated Kasich Sales Tax and Severance Tax Plan. “As expected, the amended budget will also not include Mr. Kasich’s proposal to greatly expand the sales tax base to include many previously untaxed professional services. Also gone is his proposal to hike severance taxes on the extraction of shale oil and natural gas.” [Toledo Blade, 4/8/13]
 
Youngstown Vindicator Headline: “New poll shows skepticism for new severance tax.”  “A poll released Thursday by the Ohio Petroleum Council shows that 76 percent of Ohio voters believe increasing the severance tax on the oil and gas industry could negatively impact the state’s economy and curb energy development here.” [Youngstown Vindicator, 4/5/13]
 
Columbus Dispatch Headline: “COST opposes sales-tax expansion.” “Yet another trade organization has come out against Gov. John Kasich’s proposed sales-tax expansion, although this group’s opposition isn’t as direct and in a way gives the governor some credit for the overall concept. In a study conducted by the accounting firm Ernst & Young that was released by the Council on State Taxation says taxing business-to-businesses sales transactions would result in “70% to 80% of the increased revenue derived from sales taxes on business input purchases.” Similar arguments have been made in the piles of negative testimony against Kasich’s proposed plan in the Ohio House. [Columbus Dispatch, 4/5/13]
 
LOUISIANA
Jindal Proposed Elimination Of Louisiana Income And Corporate Taxes, Paid For With Increased Sales Taxes. “Gov. Bobby Jindal is proposing to eliminate Louisiana’s income and corporate taxes and pay for those cuts with increased sales taxes, the governor’s office confirmed Thursday. The governor’s office has not yet provided the details of the plan.” [Times-Picayune, 1/10/13]
 
Jindal Plan Would Raise Sales Tax 47% – Combined Average State And Local Sales Rates Would Be Highest In The Country. “Gov. Bobby Jindal’s proposal to eliminate the state’s income and corporate taxes would raise the state sales tax to 5.88 percent, eliminate about 200 exemptions and include a rebate for middle- and low-income residents as well as for some retirees… The planned increase in the sales tax would raise the current rate by about 47 percent and would come on top of local sales taxes. Residents in New Orleans, for example, would pay a combined rate of about 11 percent under the plan. The proposal also calls for increasing the state’s cigarette tax from 36 cents to $1.41 per pack. Louisiana already has one of the highest combined average state and local sales tax rate in the country and the increase would put the state at the top of that list, according to information from The Tax Foundation.” [Times-Picayune, 3/14/13]
 
Plan Would Expand Sales Tax To New Services, Eliminate 200 Tax Exemptions. “Sales taxes would be expanded to some services under the plan, said Tim Barfield, Jindal’s point man on the tax proposal… The proposal would eliminate about 200 tax exemptions, including about 130 that will be wiped out due to the elimination of the income and corporate taxes. The administration plans to keep some existing exemptions for economic development, such as the Enterprise Zone program, tax credits for movie production, and historical preservation tax credits. However, some of those programs would be adjusted to be less generous.” [Times-Picayune, 3/14/13]
 
Lawmakers “Hesitant” On Jindal Proposal, Concerned It Would “Fall Disproportionately Harder On The Poor.”“Lawmakers responded with caution Friday to Gov. Bobby Jindal’s proposal to eliminate Louisiana’s income tax in exchange for higher sales taxes and other tax code changes, saying they needed more specifics about the idea… ‘I’m not totally sold. I want to see numbers. If the burden falls too much on the low- to middle-income families, I could not support that,’ said [Rep. Mike] Danahay, D-Sulphur, a conservative who often votes with Jindal. That concern was repeated by other lawmakers who worried a sales tax hike – in a state with one of the highest combined local and state sale tax rates in the nation – would fall disproportionately harder on the poor, because sales taxes take a larger slice of their earnings.” [Associated Press, 1/18/13]
 
April 2013: Jindal Tax Plan “Stalled As Legislative Session Nears”. “Gov. Bobby Jindal’s main legislative priority, a massive tax rewrite proposal, is in trouble and finding little public support as lawmakers open their annual regular session Monday. But Jindal’s had trouble selling the idea to lawmakers, and recent polls have shown the proposal isn’t popular with state residents either. ‘Overall, I do not see a groundswell of support,’ said Rep. Eddie Lambert, R-Gonzales. ‘I don’t think it can get passed. It would have to be a drastic turnabout.’” [Associated Press, 4/6/13]
 
Reuters: “Jindal’s Popularity Slumps” After Unveiling Tax Plan. “Louisiana Governor Bobby Jindal, one of the nation’s most prominent Republicans and a possible 2016 presidential candidate, has fallen out of favor with local voters, and his bold plan to scrap the state income tax is running into trouble… his Louisiana approval rating was down to 38 percent in a recent poll, worse than Democratic President Barack Obama in one of the most conservative states. The poll suggested voters think he is spending more time traveling outside the state and burnishing his credentials for a possible White House run than tending to local matters.” [Reuters, 4/7/13]
 
Hammond Star Editorial: Jindal Plan Another Attempt To “Pander To Louisianans.” “Gov. Bobby Jindal continues to come up with new ideas to pander to Louisianans, maybe in an attempt to shift attention away from the deep cuts taking across the state. This week, his topic is income taxes. Jindal proposed Thursday eliminating the state income tax and replacing the lost revenue through raising the sales tax and eliminating tax ‘loopholes.’ The governor seems to think this would be a “revenue neutral” move. This seems highly unlikely.” [Anthony James, Hammond Star Editorial, 1/15/13]
 
Jindal Plan Could Result In Tax Increase For “More Than 100,000 Retired State Employees And Teachers.” “Gov. Bobby Jindal’s plan to eliminate personal income taxes could result in a tax increase for more than 100,000 retired state employees and teachers if the revenue hole is — as suggested — partially offset with a sales tax increase, according to the leaders of two retiree groups. Others who retired from public service also would be affected, the officials say, because individuals who draw public pensions do not pay personal income tax on those benefits.” [Advocate, 1/25/13]
 
Institute on Taxation and Economic Policy: Jindal Plan “Amounts To A Tax Increase On Bottom 80 Percent Of Louisianans,” Average $25,423 Tax Cut For Top 1 Percent. “The Institute on Taxation and Economic Policy (ITEP) used its Microsimulation Tax Model to show the impact of eliminating the personal and corporate income taxes and increasing the sales tax rate to achieve overall ‘revenue neutrality’—a goal the Governor previously said would be part of his tax reform agenda… The bottom 80 percent of Louisianans in the income distribution would see a tax increase from repealing the personal and corporate income taxes and replacing them with a higher sales tax… Louisianans in the top 1 percent would see an average tax cut of $25,423, or 2.3 percent of their income under the plan described above” [Institute on Taxation and Economic Policy Brief, January 2013]
 
Tax Policy Center: Jindal Plan Would “Dramatically Shift” More Of Louisiana’s Tax Burden On Lower-Income Households. “[B]ase broadening can also push more of the burden to low-income households. Louisiana currently excludes groceries and utilities from taxation; taxing them would be especially difficult for families with limited resources. In fact, even without base broadening, the proposal would dramatically shift more of the burden of Louisiana’s taxes onto lower-income individuals. Since low-income households devote a higher share of their income to consumption, they end up paying higher effective tax rates than higher-income households which tend to spend less and save more. This concern is particularly stark in Louisiana, which was recently ranked as the sixth most unequal state in the country by one measure of inequality.” [Tax Policy Center, 1/14/13]
 
Tax Policy Center: Maintaining Current Revenues With Jindal’s Plan Would Require That Sales Tax Revenues “More Than Double.” “The higher tax burden for low-income households is no small concern. Last year Louisiana collected $2.9 billion through the individual and corporate income taxes and another $2.6 billion through the general sales tax. Maintaining current revenues with Jindal’s plan would require that sales tax revenues more than double, which means that, absent a significant broadening of the tax base, the tax rate would also have to rise substantially.  For households that don’t pay income taxes and save little or no income, this amounts to close to a 4 percentage point drop in after-tax income—about the same magnitude of tax pain for these households as going off the fiscal cliff.” [Tax Policy Center, 1/14/13]