With a 55-35 vote, the Ohio House passed HB 375 last week,  a bill which raises taxes on shale Taxed-Enough-Already-300x300drillers.  Only six Republican lawmakers voted against it:

John Adams

John Becker

Jim Butler

Ron Hood

Matt Lynch

Andy Thompson

Democrats and Governor Kasich were critical of the measure, both sides believing the bill does not increase taxes enough.  Democrats are concerned with covering environmental and infrastructure costs while Governor Kasich is looking for extra revenue to cover and take credit for an income tax cut.

HB 375 includes the following provisions as reported by the Stow Sentry:

-Sets the tax rate on horizontal hydraulic fracturing at 2.5%.  Vertical wells will be taxed at lower rates.

-The first $10 million of production will not be taxed so that companies can recover initial investment costs.

-Tax proceeds will be divided between regulatory efforts, well cleanup, and a statewide income tax cut.  17.5% of tax proceeds will be directed to local communities.

The bill will move to the Senate where Senate President Faber appears open to passing something, but just what he is not ready to say.  The Stow Sentry quotes Senator Faber as follows,

“We’ll continue to look at what the House has done.  Remember, they’ve spent considerable time working on this bill, so we’ll certainly take a look at it. I think we need to pass something on the severance tax. What that something is is the question, and we’ll not act until we know the answer to that question.”

Governor Kasich is disappointed in HB 375 as the 2.5% tax it imposes is much lower than the 4% he originally proposed and does not raise enough revenue to cover a statewide income tax cut.

Ohioans need to consider if an income tax cut gained at the expense of a targeted tax increase has the same economic benefit as a tax cut gained by cutting state spending.  Economic savvy Ohioans will answer, no.

But, we have seen this strategy used by Governor Kasich before as the income tax cut he proposed through the biennial budget bill in 2013 was had at the expense of sales and property tax increases.

And as Governor Kasich lowers income taxes while raising other taxes, he continues to increase state spending through his biennial budget and with his implementation of Obamacare’s Medicaid expansion.  And don’t forget the recent passage of State Issue 1 which was backed by Governor Kasich and increases state obligations for infrastructure spending.

As we move closer to the presidential campaign, Ohioans can expect to see Governor Kasich continue to pick winners and losers on the tax side and on the spending side as he maneuvers to win favor with certain constituencies and claim bragging rights on accomplishments gained at the expense of others.

So if HB 375 becomes law and Ohioans receive another income tax cut as a result, credit should be given to the hard work and risk-taking of the fracking industry, not the deal-making and glad-handing of the Kasich administration.

Sponsors of HB 375 are Matt Huffman, William Batchelder, Dave Hall, Cheryl Grossman, Barbara Sears, Bill Hayes, Terry Boose, Peter Beck, Gerald Stebelton, Brian Hill, Lynn Wachtman, Ron Amstutz, Al Landis, Gary Scherer, Nan Baker, Jim Buchy, Cliff Rosenberger, Anthony DeVitis, Jeff McClain, Robert Sprague, and Louis Terhar.