BY MICHAEL HAWTHORNE
Enquirer Columbus Bureau
COLUMBUS -- An Ohio family of four earning $50,000 a year is expected to get a $126 state tax cut next year.
Although Gov. George Voinovich once threatened to veto a law that created the proposed tax cut, calling it irresponsible and politically motivated, he described it Thursday as a "dividend to taxpayers."
State lawmakers approved the tax cut two years ago in an attempt to give back money to taxpayers when Ohio has a budget surplus. The bigger the surplus, the greater the tax cut.
"We're cutting income taxes . . . because we've worked harder and smarter to put Ohio's economy back on the right track," Mr. Voinovich, the Republican candidate for U.S. Senate, said Thursday.
During the budget year that ended Tuesday, higher-than-expected tax collections and lower-than-expected spending by state agencies pumped $701 million into a fund set aside for tax cuts, Mr. Voinovich said.
The state returned $263 million to taxpayers last year and $401 million in 1996.
The amount changes from year to year because lawmakers didn't permanently lower tax rates. The 9 percent reduction for each taxpayer this year is based on tax rates effective in 1995, instead of the artificially lowered rates from last year.
A family of four earning $50,000 a year will receive a $126 tax cut on their 1998 tax return, compared to a $56 cut in 1997 and $95 in 1996, according to the state Department of Taxation.
The way the tax cuts are calculated has led to confusion among some taxpayers.
Most taxpayers, for instance, actually paid more in state income taxes in 1997 than they did in 1996. But the amount was still less than what they paid in 1995.
Paolo DeMaria, director of the state Office of Budget and Management, said he was surprised by a surge in tax collections between April and June. In late May, he estimated $350 million would be available for tax cuts.
Using that projection, lawmakers opted to head into the fall campaign season promising bigger tax cuts to individuals instead of doing more to meet their court-ordered obligation to fix public schools.
While $200 million in surplus funds will be diverted to finance school construction and repairs, the amount falls short of the needs identified by an Ohio Supreme Court decision last year that declared the state's school funding system inadequate and unconstitutional. Statewide, some $16.5 billion is needed to construct and repair school buildings, according to the non-partisan Legislative Budget Office.
Democrat Mary Boyle, Mr. Voinovich's opponent for the U.S. Senate seat being vacated by Democrat John Glenn, said Mr. Voinovich should have done more to aid schools. But she stopped short of saying state leaders should have chosen schools over tax cuts.
Ms. Boyle also questioned why Mr. Voinovich led a drive for a sales tax increase for schools and property tax relief if the state budget surplus was so large.
"I don't believe it was in the best interests of the people of Ohio to ask for the largest sales-tax increase in the history of the state at a time when the state had a significant surplus," Ms. Boyle said.
Voters defeated the sales-tax proposal in May by a 4-1 margin. Responding to Ms. Boyle's criticism, Mr. Voinovich said he pushed for a steady source of revenue to boost funding for schools in the future. Since a recently enacted state law requires the state to spend more on schools, he said, it is unlikely Ohioans will see another tax cut as large as the one granted this year.
It would have been easier politically to do nothing in response to the school-funding decision, he said.
"I'm not stupid. I'm a politician," Mr. Voinovich said. "At least I gave the voters a chance to have a say on the issue."
