The Libertarian Party of Ohio takes positions on many legislative issues and would like to applaud some of these efforts and explain why we support the intention of bills as written today. The Ohio 133rd General Assembly has many tax matters in the decision process we have analyzed.
HB 18 (Exempt veterans disability severance pay from income tax) has passed the Ohio House and is in process in the Senate. This bill provides for exemption from state income tax, payments for disability of honorably discharges military veterans.
LPO Support: In general, the reduction and elimination of taxation is supported by the LPO. In this legislation, there are several other issues that surface. The cost of waging war is totaled in the cost of troops and materiel. Rarely do we citizens see the continuous costs of repatriating troops and the physical and psychological toll war takes on humans. This tax exemption puts strain on the state budget and should be a reminder that we should think of the total cost of war before we enter the next one.
In addition, a simple principle – exemption of a single type of income from income tax calculation requires 39 pages! This is a testament to the complexity of our laws. We further seek to reduce that complexity so the average person can understand the laws we are required to follow.
HB 19 (Exempt feminine hygiene products from sales tax) and HB 60 (Exempt infant/toddler diapers from sales tax) both return to the Ohio House to exempt from sales tax the sale of tampons and other feminine hygiene products associated with menstruation.
LPO Support: In general, the reduction and elimination of taxation is supported by the LPO. In these two pieces of legislation, the LPO would also like to point out that exemption of a single category of product from income tax requires a 30 page document (HB 19) and a 29 page document (HB 60) due to the complexity of our legal structure. Combined 59 pages to exempt two narrow product categories. Another issue with this legislation is that, to date, the only opponent to testify against these bills is the Ohio County Commissioner’s Association. Ironic that government objects to actions of government while there were no opposition groups we could find to a tax reduction – only government.
HB 92 (Require voter approval to increase county sales tax rate) is in committee in the Ohio House with no documented status past the committee hearing from March 13.
LPO Support: This legislation seems completely obvious to the LPO. In order to force a tax increase, it should be passed by vote. While we understand that non-county residents will be affected with a tax passed (or not) by the residents, it seems very logical that the rules for those in a jurisdiction should be made by those who are citizens of that jurisdiction.
HB 150 (Enact the Community Bank Tax Relief Act) is in committee to reduce the highest financial institutions tax rate, exempt newly formed banks for their first three years, limit the tax base for highly capitalized institutions, and to limit the application fees charged by the Superintendent of Financial Institutions for approval to incorporate a state bank.
LPO Support: In general, the reduction and elimination of taxation is supported by the LPO. This legislation is created to assist those wanting to start a state incorporated community bank. This is partly an attempt to relieve some of the burden from explosive growth of regulatory legislation which has reduced the number of financial institutions in the United States by nearly 2300 just since 2009. The US has only 1/3 of the number of financial institutions from 30 years ago. If you look back 40 years ago, we have only 1/4 the number (from over 14,000 to about 4,600). The smaller the institution, the less chance of survival in a regulatory framework that drains profit, innovation, and makes smaller institutions more vulnerable to acquisition by larger institutions.
In addition, the LPO position on elimination the Ohio Commercial Activity Tax (CAT)
This position is for several reasons starting with the need to reduce government activity in the private sector and that can only be done with the reduction of resources to pay for private sector interference by the state. While we are mindful of the advice from Madison, “If (people) were angels, no government would be necessary.” We also know the next words … “If angels were to govern (people), neither external nor internal controls on government would be necessary.” Since we find ourselves with less human beings who are less than perfect by nature, we have controls on the use of government. Reduction of funding is one of those controls on it’s intrusion.
Beyond the philosophical issues of taxation, the LPO draws support for our call to repeal the Ohio CAT from in depth research including that from the Tax Foundation. The Tax Foundation which is the nation’s leading independent tax policy nonprofit. Since 1937, the Tax Foundation has provided principled research, insightful analysis, and engaged experts to inform on smarter tax policy at the federal, state, and global levels – with funding from individuals, activities, foundations and other sources listed here:
In their work found here:
As an introduction to their analysis of the Ohio CAT tax policy, they start:
“As a gross receipts tax, the Ohio CAT represents a throwback to a far earlier era, bringing back a form of taxation once on the path to extinction. Such taxes were nearly done in by a consensus that levying a tax on the basis of gross revenues was inequitable, promoted otherwise inefficient economic decision-making, and impeded growth. The adoption of the CAT, therefore, was—and remains—a matter of significant controversy, as well as the subject of considerable interest for policymakers and tax economists.”
In addition, the Tax Foundation findings on the Ohio CAT include:
- Because profit margins vary widely across industries and even across individual businesses, and because intermediate transactions are taxed in a gross receipts tax regime (resulting in tax pyramiding), businesses can face wildly disparate effective tax rates under the CAT.
- It is difficult to attribute any positive economic outcomes to the tax package that introduced the Ohio CAT even though it represented a significant reduction in overall tax burdens.
- The CAT employs broad nexus standards which have led to extensive litigation and leaves many important legal questions unanswered.
- The factors which led states to abandon gross receipts taxes have not changed; they remain an inefficient and inequitable form of taxation long since superseded by more modern revenue tools.
For these reasons we support the elimination of the Ohio CAT. And we point to our continuing position with respect to respect for the individual and reduction of government intrusion in daily life.
From Libertarian Party Platform:
All persons are entitled to keep the fruits of their labor. We call for the repeal of the income tax, the abolishment of the Internal Revenue Service and all federal programs and services not required under the US Constitution. We oppose any legal requirements forcing employers to serve as tax collectors. We support any initiative to reduce or abolish any tax, and oppose any increase on any tax for any reason. To the extent possible, we advocate that all public services be funded in a voluntary manner.