Tuesday, February 20, 2007

Unnecessary tax breaks costing state, study says

By Mark Niquette

The Columbus Dispatch

The state needs to scrutinize the billions of dollars in tax breaks it allows and scrap those that aren't needed or can no longer be justified, a study concluded last week.

Ohio provides tax credits and other deductions to encourage economic development or for other reasons. Those exemptions were estimated to reach $6.27 billion in fiscal year 2006 and $7.12 billion this fiscal year, although the value of many has changed since tax reform took effect in 2005.

The tax exemptions are a significant part of the state budget, and it isn't clear why some breaks are still in effect, according to the report by Policy Matters Ohio, a research group from Cleveland. In other cases, the tax breaks benefit a single industry or company.

For example, brewers and beer importers have been getting a credit since 1963 for paying part of a beer and malt beverage tax a few weeks in advance, and those who purchase fractional shares on jet aircraft pay only a maximum of $800 in sales tax, the report said.

"There are legitimate, useful tax (breaks)," said Zach Schiller, Policy Matters Ohio's research director and author of the report. "However, there is no reason why billions of dollars worth of foregone revenue should escape regular state scrutiny, any more than state spending for any other purpose should."

Ohio Tax Commissioner Richard Levin said it could prove difficult to repeal many existing credits.

"If we can stand against creating new exemptions, I think that would be a great achievement," he said.