Gov. John Kasich’s proposal to boost taxes on tobacco, beer and wine to help underwrite another income tax cut has lawmakers in the Ohio’s border counties concerned that consumers will react by crossing state lines for their purchases.
Kasich wants to lower personal income taxes paid by individuals and small businesses by a cumulative 17% over the next two years.
As part of the package to help pay for it, Kasich proposes raising the sales tax rate by a nickel on the dollar, expand the sales tax base to a handful of services, raise cigarette taxes by 65 cents per pack, bring other tobacco products in line with the higher cigarette level, and implement what his administration characterizes as an inflationary increase in beer and wine taxes.
The administration’s proposal would raise the tax on beer by 70%, putting Ohio 80% higher than Michigan, 213% higher than Indiana, 350% higher than Kentucky, 100% higher than West Virginia, and 350% higher than Pennsylvania.
A similar hike on wine would put Ohio on par with Michigan but 11.75% higher than Indiana, 2% higher than Kentucky, but 49% lower than West Virginia.
There are similar comparisons with cigarettes and sales taxes. Opponents say border counties will be at a competitive disadvantage.
Ohio Tax Commissioner Joe Testa noted that the state has increased border investigations since the last time the state raised the cigarette taxes two years ago to reduce interstate smuggling. He said that by the time higher taxes are poured into a 12-ounce mug of beer and a 5-ounce glass of wine, they will amount to a penny more for consumers.
The overall tax reform package carries a net tax cut of $39 million over two years.