Bad Idea in Ohio: Pay For Income Tax Cut with a Fracking Tax


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marcellus utica shale.jpgAs a candidate in 2010, Ohio’s now Governor John Kasich made waves by promising to repeal the state’s personal income tax if elected. While this plan proved unrealistic because of the state’s already dire fiscal situation, Governor Kasich now thinks he’s found the way to pay for at least some income tax cuts: a “fracking” tax.

The much-ballyhooed plan he announced earlier this week would tax the anticipated boom in the state’s natural gas mining expected to result from newly available “hydraulic fracturing” technology, and plow every dollar of that new revenue from the tax into cutting personal income tax rates.

This plan likely seems odd to those who have sensibly advocated a “fracking” tax to help pay for the environmental costs associated with this technology, to say nothing of the many Ohio residents who have lived through painful cuts in education, library services, and a host of other vital services during the recent recession.

Moreover, the governor’s claim that his proposed income tax cuts would help “create the jobs-friendly climate that will get our state back on track” rings false, coming on the heels of a much bigger income tax cut pushed through by then-Governor Robert Taft in 2005. Policy Matters Ohio found that these tax cuts didn’t spur economy growth, and actually concluded that “the state’s relative economic decline accelerated” after those tax cuts were passed.

Policy making requires economic projections, and some things are harder to predict than others.  Energy extracting industries are hard.  Using an uncertain revenue source to pay for irresponsible tax cuts is two kinds of bad in one policy. There are smarter ways to rebuild revenues and the economy at the same time.
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