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Toledo Blade: Ohio House proposes millions in tax breaks


Jim Provance on April 27, 2017

The Blade

COLUMBUS — Despite falling short so far in their commitment to plug an $800 million hole in Gov. John Kasich’s plan, House Republicans this week added millions in tax breaks to their version of the next state budget.

Prescription eyeglasses, contact lenses, and frames would be exempted from state and local sales taxes beginning July 1, 2019. The move, pushed by state Rep. Derek Merrin (R., Monclova Township), is expected to cost state coffers $22.4 million a year and local governments and transit authorities $6.8 million.

Plays on digital jukeboxes, arcade games, and similar electronic entertainment devices that accept direct payment would be exempted from the tax beginning Oct. 1. The estimated price tag is about $1 million a year.

Mr. Kasich vetoed a similar jukebox measure late last year, saying at the time that it was too narrowly targeted and could “have the unintended consequence of negating the state’s tax on all digital products [i.e., downloaded books, movies, and music].”

There are fewer breaks than in past budgets when lawmakers had more money to work with. Lawmakers have determined Ohio can’t afford another income-tax cut as state revenues have consistently fallen short of expectations.

Republicans in the Ohio House of Representatives abandoned the governor’s proposal to trade higher taxes on sales, tobacco, alcohol, and shale oil and natural gas production for a 17 percent cut in the personal income tax.

Among the proposals killed was Mr. Kasich’s plan to extend the 5.75 percent state sales tax, as well as local piggyback taxes, to travel agents.

House Republicans, however, tucked a provision into their proposed budget that would extend the sales tax to fees charged by online travel booking agents like Orbitz, Expedia, Travelocity, and Priceline. A similar move was attempted two years ago, but did not survive to the final two-year budget that expires June 30.

Stephen Shur, president of the Travel Technology Association, argued before the House Finance Committee on Wednesday that the move could cost Ohio money. He said about 40 percent of online hotel booking searches do not have specific destinations in mind, so those services might try to steer travelers to states without such a tax.

“The opportunity cost of this tax is high,” he said. “It’s not about raising revenue. It’s not about closing a loophole that doesn’t exist. It’s not about leveling any playing field. It’s simply an expansion of the sales tax to services and a disincentive for online travel agents to steer people to Ohio hotels.”

Zach Schiller, of the left-leaning Policy Matters Ohio, called the House proposal a “mixed bag overall.”

“There are a couple of ways in which the bill takes positive steps, specifically with its move to make sure Priceline.com and other intermediaries are taxed on sales of hotel rooms and also with the move to ensure out-of-state sellers are paying the equivalent of the sales tax,” he said.

The bill attempts to force out-of-state merchants with annual Ohio sales exceeding either $100,000 in value or 200 transactions to collect and remit Ohio sales tax, regardless of whether they have a physical presence or substantial nexus with the state.

This is designed to push the limits on a U.S. Supreme Court decision several years ago that blocked such moves as an infringement on Congress’ right to regulate interstate commerce.

The Buckeye Institute, a conservative think-tank, believes that this is an inevitable conversation.

“We know this is going to have to be addressed,” said Greg Larson, senior policy analyst. “If we’re going to shift to sales taxes, we’re going to have to raise sales tax revenue. We can’t do that with brick-and-mortar stores shutting down, so this is going to be a big issue. It’s going to require an awful lot of thinking.”

The eyeglasses exemption, supported by the Ohio Optometric Association, mirrors Mr. Merrin’s separate House Bill 116.

“There are only 13 other states in America that tax prescription eyewear,” Mr. Merrin said. “We should not tax medically necessary prescriptions.”

He said he requested a delayed effective date, believing he would otherwise have had a tougher time getting it passed in this budget climate.

Among other tax changes, the House would remove Mr. Kasich’s proposal to centralize, with the state, collection and disbursement of municipal taxes on business income with local governments paying a fee for the service.

The number of income tax brackets would be reduced from nine to seven, with much of the focus on the scale’s lower end. House Republicans said the move will not raise anyone’s taxes.