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Governor Kasich's Alternate Reality

Lee Schalk
August 27, 2012

It’s time for a reality check. Over at Opportunity Ohio, our friend Matt Mayer just released this report, listing 10 erroneous claims being made by Governor John Kasich to defend his severance tax hike plan. While the tax plan isn’t law yet, it’s already posing a serious threat to Ohio’s economic growth and has caused Ohio’s “attractiveness for energy exploration” ranking to plummet. We’ve also seen that Ohioans aren’t falling for the tax scheme. Yet somehow, Governor Kasich still insists on defending it. While this is a perfect time to reduce Ohio’s burdensome income tax, lawmakers should look at common sense trims to spending and avoid taxing the promising energy industry. The following excerpt from the Opportunity Ohio report explains why, fundamentally, this type of tax is not in Ohio’s best interest:

  • Kasich Claim #5: Higher taxes will result in more energy activity in Ohio.
    • Fact: As free market economist Milton Friedman and President Ronald Reagan both noted, if you want less of something, then tax it. It simply defies common sense that Ohio will get more oil and gas activity by increasing the taxes on that activity – even if this one tax remains lower than other states. If Ohio wants more oil and gas activity, it should leave the tax rate at its current level to ensure the gap between Ohio and other states remains as big as possible. Why risk chasing away energy companies, the jobs they will create, and the economic activity in hotels, restaurants, hardware stores, and other secondary goods and services providers? A Fraser Institute survey of energy company executives showed that Ohio fell from #2 to #14 in terms of attractiveness for energy exploration because of Governor Kasich’s severance tax hike plan.

Clearly, Ohioans deserve better than a tax plan that undermines investment and hurts job creation in their state. The growing energy economy has been estimated to generate over 200,000 jobs, increase output by over $22 billion and taxable wages by over $12 billion. Ohio’s leaders should strive to turn those estimates into a reality while reducing spending that grew by 43 percent (even adjusting for inflation and population growth) from 2000 to 2010. Let’s hope they come to their senses sooner than later.


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