A trend in Ohio over the last five decades has been to convene a committee of legislators to study and recommend improvements to the state’s tax structure about every ten years. Since the state’s last tax study was completed in 2004, it seems almost like clockwork that the Ohio 2020 Tax Policy Study Commission began its work last week.
The commission was created in House Bill 64, the state’s biennial budget bill, and is charged with reviewing the state’s tax structure and policies to maximize Ohio’s competitiveness. The goal is to allow the legislature sufficient time to craft recommendations that take a longer-term and more comprehensive approach to tax policy and tax reform. Typically, such major tax changes are made in the context of developing the state’s biennial budget, which – due to time constraints, the complexity of the budget, and other factors – often preclude thoughtful consideration and invite an emphasis on short-term impacts.
More specifically, the commission must make recommendations on: transitioning Ohio’s personal income tax to a 3.5 or 3.75 percent flat tax by 2018; making the tax credit program for the redevelopment of historic buildings more efficient and effective; reforming Ohio’s oil and gas severance tax; and evaluating all state tax credits.
At its first hearing on Wednesday, Tax Commissioner Joe Testa provided the commission with an overview of Ohio’s major taxes and current tax policy. However, the big news coming out of the Wednesday hearing was the release of findings and recommendations from an informal working group of lawmakers, Kasich Administration officials and oil and gas industry representatives on Ohio’s severance tax.
Whether or not – and how much – to raise the severance tax has been an ongoing and contentious debate since Gov. John Kasich first proposed an increase in 2012. While the working group didn’t recommend a severance tax increase, it did propose updating the tax to make it comparable to other shale play states across the nation. It also recommended that the commission continue to review the severance tax as part of its larger analysis of Ohio’s overall tax structure.
The deadline in HB 64 for the commission to publish its findings and recommendations on the severance tax was actually October 1. While it missed this deadline by a few weeks, the commission has until October 31, 2016, to publish its findings and recommendations on the historic rehabilitation tax credit and a final deadline for all other matters on October 1, 2017. The commission announced plans to meet monthly in order to gather the information necessary to complete these remaining assignments.