BY The Associated Press
COLUMBUS -- A penny may not sound like much, but tack it onto the state sales tax and it could add up to $2.5 billion in lost business for Ohio retailers, warns a conservative economics professor.
Ohio University Professor Richard Vedder studied the potential economic fallout if voters on May 5 approve state Issue 2, the proposal to raise the sales tax from 5 percent to 6 percent.
Coupled with county sales taxes of 0.5 percent to 2 percent, a 6 percent state sales tax would send Ohio shoppers streaming across the border into neighboring states that have much lower sales taxes, Mr. Vedder said Friday.
The effect would be felt most in the state's 27 border counties, where 3.3 million Ohioans live, he added. Border county residents already take advantage of the tax difference.
Adding to the gap would only make it harder on gasoline stations, restaurants and other retailers on the Ohio side, said Rep. Gene Krebs, R-Camden.
"What we're worried about is a steady stream becoming a flood," Mr. Krebs said.
Mr. Krebs represents rural Preble County, whose 40,000 residents often travel to nearby Richmond, Ind. The sales tax in Preble County is 6.5 percent, compared with Indiana's 5 percent.
He argues that schools -- at least those in border counties -- will be hurt by a higher sales tax. If businesses close or cut back, it will mean less money for schools from the state's tax on business inventory and equipment, he reasoned.
Issue 2 supporters, including Gov. George Voinovich, say the $1.1 billion the tax increase would raise annually will help meet an Ohio Supreme Court order to fix the way the state pays for public schools -- and give homeowners a property tax break.
Businesses have supported the campaign to the tune of $2.5 million, said Cliff Treyens, spokesman for the pro-Issue 2 campaign.
But while the Ohio Chamber of Commerce, the Ohio Manufacturing Association and other large corporations and trade associations have lined up behind Issue 2, small business groups are opposed.
