DaytonDailyNews.com

COLUMBUS — More than three years ago, Republicans Jon Husted, Bob Taft and Bill Harris stood on the factory floor at Rack Processing Co. in Moraine and signed a 2,000-plus page budget bill that included sweeping tax changes they predicted would help revive Ohio's troubled economy.

They wore "21%" stickers on their lapels, heralding a 21 percent income tax cut that would be phased in for all Ohio taxpayers over five years.

Today state leaders are grappling with a $640 million budget shortfall that must be made up by June 30, when the state's fiscal year ends, and a projected $7.3 billion cut for the next two-year operating budget.

Staggering job losses and skittish consumers are the main reasons for the multi-billion dollar problems, but politically popular tax breaks may shoulder some blame too.

Without that 21 percent income tax cut, Ohio would have $5.6 billion more in revenues for the upcoming two-year budget, according to Gov. Ted Strickland's office.

Strickland, too, cut taxes. After his election in 2006 he expanded the homestead property tax exemption program so that all homeowners over 65 or disabled would qualify. The cost was projected to be $257 million a year — or $514 million over the two-year budget.

"The fact is if we hadn't had these tax cuts, we'd still have a problem but it wouldn't be nearly as big a problem as it is," said Zach Schiller, research director at Policy Matters Ohio, a left-leaning think tank in Cleveland. "To act as though our budget problems now are just a matter of the national economy is incorrect."

Dan Navin, tax director for the Ohio Chamber of Commerce, attributed the revenue shortfall to the national economic collapse. In the state's budget projections, he said, officials took into account that the revenue would not be returning to state coffers.

At this point, there is no talk in Columbus about putting the brakes on the tax breaks. Strickland said he believes a tax increase would be counterproductive. More than 60 percent of Ohio voters favor budget cuts over tax increases, according to a recent poll by Quinnipiac University.

And no politician wants to be labeled "Tax Hike So-And-So" in the next round of campaign ads. Ever since Taft and the Republican-controlled legislature approved a 6-cent-per-gallon increase in the state gas tax and a penny increase in the state sales tax in 2003, Ohio Democrats have enjoyed reminding voters that the GOP was in charge at the time.

Instead of talking about tax increases, Strickland is making a pitch for $5 billion in federal aid to help tide Ohio over into better times. Failing that, Ohio may be forced to cut some state agencies' budgets by 25 percent. That could mean college tuition goes up by $2,000, thousands of state workers are laid off, required inspections of nursing homes may not be done, and six prisons, another mental health hospital and some state parks would close.

Some tax breaks are still due to be phased in in 2009.

"At an absolute minimum we should not be phasing in tax cuts when the state budget is in a free fall," said Schiller.

Navin disagreed.

"I don't think we should be raising taxes in this kind of economy," he said.

Contact this reporter at (614)224-1624 or lbischoff@DaytonDailyNews.com.