Prepared to go inside the mind of a Republican when the world of taxes meets the world of privatization in which you need to be a quantum political physicist to comprehend what is occurring.

Today, the Cleveland Plain Dealer’s “PolitiFact” examined Rep. Matt Lundy’s (D-Elyria) claim that the budget the House passed included tax breaks to “sweeten” the deal for the private companies the State is trying to sell six correctional facilities.  They found the claim to be True, because, it is.

But first, we need to apparently correct something on the issue.  Last week, the Dayton Daily News reported that the budget was amended to make the private prisons exempt from paying real property taxes if they are under contract with the State of Ohio to incarcerate Ohio inmates or juvenile offenders.  I included that information in a post last week before I had an opportunity to independently verify the information.  However, page 479 of the Legislative Service Commission’s analysis of the budget bill makes it clear the new private corporate owners will have to pay real property taxes.  I regret that error.

However, the LSC goes on and says that the new owners will not have to a pay sales tax, income tax, or commercial tax.  So, the budget as passed by the House still contains a major tax exemption for these buyers.  They have to pay property taxes, as the Administration promised, but are otherwise exempt from all other State and local taxes.

So the Plain Dealer called the House Finance Chairman to explain the reasoning behind this massive tax break, and here’s what he said:

"Typically state entities don’t pay taxes on their functions and that is true of local governments, as well,"[House Finance Chairman Ron] Amstutz [(R- Wooster] said. "And I think the desire is to maintain that status in order to provide for services at the lowest cost that we can."

If the private entities were to pay these particular taxes, which go back to supporting the local communities where the facilities are located, then "basically the state taxpayers would be subsidizing the local taxpayers at that point for a state function and typically we don’t do that," Amstutz explained.


Break out the fine mustard, because Amstutz is serve hot, fresh logic pretzels in Columbus today, folks.

Let me try to break this down.  Amstutz says that these private prison owners need to be exempted from paying the local taxes the locality has any other private business that opens up in there pays because the only reason the business is moving in there is because they’re assuming a State function.  Therefore, that’s like the State taxpayers subsidizing the locality from the State’s privatization.  Okay.  I disagree with that perspective, but I at least can see where he’s coming from: he doesn’t think local governments should financially benefit from the State’s privatization efforts (even though the local governments will now be able to collect property taxes, but whatever.)

But apply that same argument to the other part of the equation.  You know, the State taxes part and you’d get this statement:

basically the state taxpayers would be subsidizing the local [State] taxpayers at that point for a state function and typically we don’t do that.

Wasn’t this whole privatization thing supposed to be a way to increase State revenues without raising tax rates to bring the budget in balance?   Because one cannot subsidize oneself–that’s a nonsensical argument–why do they deserve a massive tax break?  Doesn’t that defeat the point of privatization?

It’s really a simple question: why is it unfair to tax the profits a private company makes from privatization, when all other profits are fair game?

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