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Ohio Gov Proposes Income Tax Cut, Hikes Elsewhere

By JULIE CARR SMYTH

COLUMBUS, Ohio (AP) â¿¿ Ohio Gov. John Kasich proposed a sweeping budget Monday that reduces state income and small business taxes through increases in other areas, boosts school funding and expands Medicaid services with help from the federal government.

The Republican governor said the $63.1 billion, two-year spending blueprint represents "the right mix" of supporting economic development and helping the needy.

"That's the hallmark of this administration," he said. "It's not enough that some people can do well. Everyone in Ohio must have the prospect of doing better."

He predicted that the state will have gone from a $7.7 billion deficit to a surplus of as much as $1.9 billion by the end of the budget cycle, triggering an estimated 4 percent tax refund from the rainy day fund to all Ohioans. The growth is being fueled by bonding of the Ohio Turnpike, bonding of the state liquor operation through Kasich's private nonprofit JobsOhio, economic gains, and added revenue from expanded gambling.

Kasich's tax reform package incorporates a significant rewrite of Ohio's tax code that delivers $1.4 billion in tax cuts over three years. Kasich said it reflects the state's shift from a manufacturing to service economy. It reduces the tax rate on virtually all small businesses by 50 percent, cuts the income tax rate statewide by 20 percent over three years, and lowers the sales tax rate from 5.5 percent to 5 percent while imposing the tax on more services.

The income tax would be cut by 7.5 percent this year, by another 7.5 percent in 2014 and by an additional 5 percent in 2015.

"There's going to be a hot time in the old town tonight," Kasich said of what he predicts will be the positive effects on the economy from the changes.

"Gov. Kasich's tax proposals are welcome, because they address Ohio's biggest long-term problem: sluggish growth in job opportunities and incomes," Ohio University economics professor Richard Vedder said in a statement released by the administration.

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