Ohio tax income up despite income tax cut

New census data provide more evidence that Ohio’s financial health is rebounding.

The Buckeye State experienced big increases in sales taxes, personal income taxes, hospital-related taxes and corporation licenses in fiscal year 2012, the Dayton Daily News found.

Ohio’s tax receipts grew by $905.9 million in fiscal year 2012, which ended last June 30, compared to the previous fiscal year, according to an analysis of 2012 Census of Governments data released Thursday.

A new income source came from one-time licensing fees of $50 million paid by two of Ohio’s new casinos.

The state got $100 million in fees from the opening of casinos in Cleveland and Toledo in May 2012. While that’s a one-time occurrence for each casino, the state will add another $100 million in the current fiscal year for the casino in Columbus, which opened Oct. 8, 2012, and one in Cincinnati, which opened in February.

Ohio tax receipts increased by 3.6 percent in the last fiscal year. That growth ranked below the national average and 29 other states, the analysis found. But the data provides hints that Ohioans are beginning to open their wallets a little more. Alcoholic beverages sale taxes, for example, rose by $4.1 million, or 4.4 percent.

Either state residents were drinking more in the last fiscal year, or they were “looking a bit higher on the shelf when they’re buying,” said Dave Pagnard, Ohio Office of Budget and Management deputy director for communications.

Indiana fared better than Ohio

While Ohio’s 3.6 percent increase only ranked 30th among the 50 states, it was a higher growth rate than any of the state’s neighbors, except Indiana, which had a 5.3 percent growth in tax revenue.

The fiscal outlook for Ohio is better than reflected in the Census numbers, said Fred Church, deputy director of Ohio’s OBM, because the 2012 fiscal year tax collections include the last of the state income tax reductions that began in 2005.

The last year of the tax cut, which was delayed until tax year 2011 because of the recession’s negative effect on tax revenue, cut $450 million out of state tax collections that showed up in fiscal year 2012, Church said. If that money was put back in for comparison purposes, he said, the state’s tax revenue would have grown by by 5.4 percent instead of 3.6 percent.

Church said the adjusted figure “is what I would call not spectacular but solid growth.”

Ohio Tax Commissioner Joe Testa said the state budget is a better indicator than the Census data of how Ohio is doing economically.

“We went from an $8 billion deficit to a $250 million dollar surplus at the end of Fiscal Year 12, and as we approach the end of Fiscal Year 13 we’re on track to fill our rainy day fund with a billion dollars in surplus funds and provide tax cuts,” Testa said.

State-by-state comparisons are also complicated by the fact that some states are raising taxes, while others are not, said Gary Gudmundson, spokesman for the Ohio Department of Taxation.

Nevertheless, Lisa Blumerman, chief of the Census Bureau’s Governments Division, said the state tax collections provide “an indicator of the fiscal health of our state governments and the ability to provide public services.”

States collect billions more in 2012

Nationwide, the new census data show, state government tax collections increased by $34.3 billion last year, to reach a record $794.6 billion. The previous high was in 2008, when the states brought in $779.7 billion, the Census Bureau reported.

The new data show that state tax revenue nationwide is “continuing to recover, albeit slowly, from the depth of the recession,” said Donald Boyd, a senior fellow at the Nelson A. Rockefeller Institute of Government at the State University of New York in Albany.

Among Ohio’s neighbors, only Indiana had a higher growth in tax revenue. The neighbors to the west ranked 22nd in the nation with their 5.3 percent increase in tax collections. West Virginia (2.8 percent), Kentucky 2.7 (percent), Michigan (1.9 percent) and Pennsylvania (1.8 percent) all had lower tax growth, ranking from 36th to 41st out of 50.

The bottom three states — California, Wisconsin and New Hampshire — showed decreases in state tax income, according to the data. North Dakota, boosted by an ongoing oil boom, ranked first in growth at 47 percent, followed by Alaska (27.3 percent) and Illinois (19.1 percent).

Sales taxes boost state’s numbers

The Census Bureau’s breakdown of Ohio’s income reflected changes in both tax law and economic reality.

Reflecting a rebound in consumer spending, the largest dollar increases in state income came from sales and gross receipts taxes — the state’s biggest income stream — which grew by more than $528 million, or 4.2 percent, to reach more than $13.1 billion last fiscal year.

License taxes, Ohio’s second-largest income source, grew by more than $294 million, or 9.0 percent.

Buckeyes are also apparently enjoying more or better adult beverages, the analysis found. Alcoholic beverages sales taxes yielded $98.1 million.

Church, of OBM, said alcohol sales taxes “pretty much chugs along” regardless of the economy. But the 2011-12 increase was considerably larger than the previous year’s, which was only 0.4 percent. He called the 4.4 percent increase “a little bit above normal.”

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