Committee Spends More Than A Year Reviewing $5.5 Billion In Tax Breaks, Recommends No Changes

Nov 21, 2018

A panel of six lawmakers charged with looking at some of the $9 billion in state tax breaks has recommended none of them be eliminated or cut back for now. Though nothing has changed, it seems few involved in the process are pleased.

Two years ago, every member of the Ohio legislature who voted approved creating the Tax Expenditure Review Committee. It would look at all 129 loopholes, breaks and credits in the state tax code over the next eight years.

Ten months after the law passed, the six state representatives and senators named to the committee finally met for the first time to consider 15 sales tax breaks. It held just six meetings over a year, under the leadership of Rep. Scott Oelslager (R-North Canton), who wrote the final nearly 200-page report.  “After all the hearings, after the draft was circulated, we decided to keep the current exemptions in place,” Oelslager said.

But Wendy Patton with the progressive research group Policy Matters Ohio sees the committee’s final recommendation this way: “They did vote to let $5.5 billion in tax expenditures or tax breaks continue without modification.”

The 15 expenditures this committee examined included sales tax exemptions for churches and other nonprofits, tax breaks for egg producers and food service, and one of the state’s largest, the $2.2 billion dollar a year credit for manufacturers called the tangible personal property tax.  That one totals nearly a quarter of all the state’s tax breaks.

Policy Matters Ohio had called for closing some loopholes and changing some others.  So did the conservative Buckeye Institute and research fellow Greg Lawson. “I would say that it didn’t quite live up to our expectations,” Lawson said. “We had over a billion dollars’ worth of tax expenditures that the Buckeye Institute had looked at and made some recommendations for closure.”

The four Republicans on the committee voted to accept the recommendation that the tax breaks be left alone – the two Democrats voted against that. One of them is Rep. John Rogers (D-Mentor-on-the-Lake), who said he voted more against the process than the conclusion. “I’m not specifically saying that any one of those 15 should be terminated. I’m just saying that we did, in my opinion, a cursory review of each of the individual expenditures and in certain situations, nobody came in to testify as proponents or opponents to any of them,” Rogers said.

Oelslager said those who provided testimony overwhelmingly favored keeping those tax breaks in place. But Rogers said testimony that a tax break should continue from someone who’s receiving it isn’t always proof that it should.

Most of the panel agreed that there wasn’t the kind of investigation that needs to be done on an important issue like whether a tax break should be changed, cut or continue. Oeslager said he’s recommended lawmakers put some money toward the next installment of this committee, so researchers can be hired for real cost-benefit analysis. He said a lack of staff “is what it came down to.” But as to whether there was also a lack of will to make changes, Oelslager said: “I can only speak for myself that we wanted to meet and comply with the law and take a good look at these things and see what information came forward.”

The Tax Expenditure Review Committee is in law, so it likely will continue. Wendy Patton at Policy Matters Ohio said its work is more important than ever, since she said tax loopholes have been expanding unchecked by the legislature – even now, in the lame duck session.  “We’re seeing some of the biggest economic development tax breaks that we’ve ever seen being proposed, even as the legislature has just demonstrated a lack of investment in actually scrutinizing whether tax breaks work for the economy,” Patton said.

The Buckeye Institute said it’s concerned that loopholes give breaks to some and not others, and that’s not fair or beneficial to the overall economy – but the only way to know that is to do research.