The Tax Expenditure Review Committee that eventually will concern itself with Ohio’s Historic Preservation Tax Credit held its first meeting April 11 with an examination of $4.03 billion in forfeited tax revenues, the lion’s share consumed by the sales and use tax exemption on tangible personal property whose buyers manufacture other tangible personal property for sale.
Sen. Scott Oelslager (R-Canton), chairman of the committee, checked off the first three items on the agenda with no testimony: sales to churches and certain other nonprofit organizations, with state revenue losses estimated at $600.1 million and county and transit authority losses at $147 million in FY18; sales by churches and certain types of nonprofit organizations, with state losses of $45.7 million and county and transit authority losses of $11.2 million in the current fiscal year; and sales to the state, any of its political subdivisions and to certain other states, with state losses of $122.9 million and county and transit authority losses of $30.1 million in FY18.
The tangible personal property (TPP) item — with estimated state losses of $2.21 billion and county and transit authority losses of $541.6 million in FY18 — drew testimony from five witnesses.
Senior Project Director Wendy Patton of Policy Matters Ohio presented testimony on tax expenditures as a whole, urging members to take a harder look at the exemptions they review. “HB9 outlined specific criteria for the committee to consider in deciding whether each expenditure should be continued, repealed, modified or scheduled for further review.”
“In conducting your review, the committee should look into more detailed questions ,” said Patton. “For instance, in examining whether a tax break ‘promotes or would promote growth or retention of high-wage jobs in the state,’ one of the factors permitted under the law, the committee should request data on wage levels for employees at recipient companies, and whether they are paid enough that they and the family members do not need public benefits such as Medicaid and food aid. In considering possible modifications, the committee should consider whether guard rails should be added to ensure that recipients are paying taxes, complying with state laws and providing information that allows for appropriate review of the tax break.”
Patton broadened her focus to address the larger impact of tax expenditures relative to tax reductions.
“The state has cut funding for libraries and local governments and underfunded early childhood education, public transit and other services relative to need. Yet tax expenditures — which have every bit as much impact on the state budget — have continued to grow and proliferate. Beyond a review of specific tax expenditures, the Tax Expenditure Review Committee should look to cut back on tax breaks,” she said. “As the tax counsel to the Ohio Manufacturers’ Association told the 2020 Tax Policy Commission two years ago, ‘To preserve the integrity of the broad tax base and ensure fairness, credits and exemptions should be reduced and discouraged.'”
Responding to Patton the LSC economist was asked for examples of expenditures created with related metrics. LSC staff responded that the commission would have to research the question for “specific goals” linked to certain expenditures that might be subject to some form of measurement.