It seems that Kasich had so much fun offering dubious tax credits to rich Ohioans during the budget process he doesn’t want to give it up. According to Columbus Business First the Kasich administration is still looking at ways to pass legislation that would exempt capital gains taxes from the state income tax.
Kasich said he will let court cases involving similar capital gains tax laws in other states run their course before revisiting the issue in Ohio. His top job-creation advisor, Mark Kvamme, seemed a bit more optimistic, however.
“We believe there is still a way to do it and we want to do it, Kvamme told Columbus Business First. “But we were not able to get it done in the amount of time we had (on finishing the state budget).”
Remember, the Invest Ohio program that was included in the budget does not resemble what Kasich said it was going to look like. It was going to be a tax credit awarded to people who took their capital gains and reinvested them into Ohio companies and held on to them for at least two year. They wanted it to be a refundable tax credit, where the state would refund investors on their original equity sale. In English, the state would be paying people to reinvest their capital gains in Ohio companies and then not tax the investments.
As the Business First article points out, sometime after the Governor proposed this idea some pesky lawyers got in the way and told him it may be unconstitutional.
Kasich said at a press conference July 1 that the capital gains tax exemption was dropped because of constitutional issues. The guv didn’t get into the particulars, but here is what we learned in an explanation via e-mail from the Ohio Department of Taxation:
“There are reported cases in federal courts,” the e-mail said, “dealing with challenges to states’ attempts to encourage in-state business activity that may have a chilling effect on out-of-state activity. These cases deal with the question of whether the states’ tax code is being used to coerce in-state activities which, in turn, harms out-of-state activity and arguably violates the (U.S.) Constitution’s commerce clause.”
Stupid constitution. Don’t you know that Kasich has a bus and if you don’t get on it he is going to run you over? How is John Kasich going to reward his rich friends by creating an on-shore tax haven if the constitution is going to prevent him from doing so?
I wrote about this often during the budget process but there is zero evidence that these types of tax credits do anything but allow rich people to avoid having to pay taxes on their investments. Not once did Kasich or Kvamme ever point to any evidence saying this plan would help create jobs in Ohio. Not once did this administration even discuss what an “investment” in an Ohio company meant either. If it is anything like what we got in Invest Ohio the definition of an “investment” is so vague that it even covers paying the salaries of current employees. Yep, you don’t even have to show you are using the money to expand or to hire new employees, you can use the revenue to cover payroll. This idea is so divorced from any sort of conventional economic development that one can only assume that the intent of it is to simply create a way for wealthy investors to not pay income tax on their investments.
Let me repeat this, the reason this economy isn’t rebounding fast enough is not because rich people don’t have enough money. The last thing we need to be doing is finding ways to make rich people richer. We need to find ways to increase demand for products and services and ways to get people back to work if we want this economy to get back on its feet.