June 12, 2025 • 9 mins
Rea Hederman of The Buckeye Institute looks at the Bill which includes a flat state tax, overall, likes what is in the Bill
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I want to talk a little bit about the state budget.
It was passed by the Senate yesterday. This happens every
couple of years, and you know this stuff can get
kind of wonky. But this budget specifically has a lot
of I think ground level items in it, forward facing
items that people should be you should be interested in it.
(00:20):
It's not as wonky as previous budgets in my view.
But here to break it down from the Buckeye Institute,
it's Ray Headerman. Ray, thanks for the time this morning.
I know you're busy. You've had a chance to look
at the version that the Senate passed on the state budget.
Here before we kind of pull out a couple of
specific items and discuss them. Give us your overall look
and overall thoughts on the state budget as you see
(00:43):
it that the Senate passed.
Speaker 2 (00:45):
Yeah, this budget really positions Ohio to be a leader
in the Midwest. We're going to be able to drive
forward with economic progress. We're going to be able to
bring companies to Ohio and reward workers. We're going to
make it easier for businesses to stuart up. We're going
to make it easier to educate our children. And I
think it's a budget that positions Ohio for the economic
(01:07):
future the next thirty years.
Speaker 1 (01:09):
So one of the things that people have their eye
on is some of the tax changes, shifting to a
flat income tax, where everybody pays two point seventy five
percent income tax except for low income earners. Those folks
are exempt. Some of the criticisms are that it gives
wealthier earners a break. Anybody over one hundred thousand dollars,
(01:31):
their tax rate goes down. So talk about the notion
of a flat tax in Ohio.
Speaker 2 (01:37):
Yeah, So this is a piece of reform that's been
ongoing for several years. You know, Ohio used to have
eight tax practice, very confusing, and with this budget, we
would only have one at two point seventy five percent rate.
You know, we've seen a lot of states moving to
a flat tax. A lot of our neighbors are Michigan,
for example, already has a flat tax, and then some
(01:59):
of them can he need to move forward to eliminating
the income tax because states want to make sure that
there's competitive as possible. So this budget would drop the
top rate, make sure that everybody pays the same rate
at two point seventy five. The other thing, Mike, and
this gets a little wonky is it gives everybody an
(02:20):
additional tax break because when you start paying the first
tax dollar of income tax, your tax liability goes from
zero to three hundred and sixty dollars because of an
artifact from previous tax reforms. And what they're going to
start doing is they're going to start lowering that three
hundred and sixty dollars amount. So when you're a low
(02:42):
income wage earner, you start paying an income tax instead
of paying a tax on your first dollar, you have
that three hundred and sixty dollars wamp some payment. You
want to make sure that we're not discouraging people. So
we're going to start lowering that rate. And that means
everybody's been a sitting from this tax reform if paying
income tax.
Speaker 1 (03:01):
So there are the critics of the flat tax, primarily
Democrats in this situation are warning that it could reduce
funding for services or police and fire and so forth.
How do states that have well no income tax or
flat tax recoup any kind of losses that they would
get with the reduction in tax?
Speaker 2 (03:23):
Yeah, you know, we have always said if you're going
to move forward with tax reform. You need to do
it in a responsible fashion, and you need to pay
for tax reform. And the Senate has come out with
a lot of good tax policies and ways to pay
for it. For example, they're eliminating a lot of tax
credits that only go to certain businesses or certain people
if they're doing certain types of behavior. This is good
(03:45):
because you want a tax code that rewards everybody, right,
you want to make sure that you're incentivizing every business.
You're not just giving it to a big businesses. You
want to make sure that everybody's playing by the same
rules and that that's a great way to move forward
and pay for these tax reductions. The other thing the
Senate budget does is it starts slowing and spending on
(04:07):
certain items. You know. We know medicaid is the second
largest piece of the budget the state pays for after education.
It slows the future growth of medicaid. So those are
proven tax reforms, and what we've seen is that states
you know, that have low tax codes keep a tight
brain on their spending. They look at better ways to
(04:28):
raise revenue, and they make sure, you know, their tax
code doesn't have a lot of special interest loopholes. And
I think the Senate budget starts closing those speaking.
Speaker 1 (04:38):
With the Ray Headerman the Buckeye Institute talking about the
state budget proposal by the Senate that has passed, the
House still needs to put their fingerprints on it before
it goes to the Governor's desk the end of the month.
One of the things that I in this budget that
I have been critical about is the Cleveland Browns Stadium
funding piece to this. And you know, say what you
want about the Browns on the field. That's a separate discussion.
(05:00):
But you know, six hundred million for brown Stadium from
and now they've changed. They changed this, and it makes
me feel a little bit better. They want to use
unclaimed funds, which is you know, old uncash paychecks or
you know, deposits and you know money that has been
sitting there unused for over a decade. How do you
feel about that? I kind of like that better than
using bonds.
Speaker 2 (05:21):
Yeah, you know, I think it's a creative way to
basically address this issue. I mean, we always have concerns,
you know, anytime you know, the state government starts offering
its dollars for these types of projects, So you want
to make sure that you know, the state government is
holding these entities, you know, to their promises and protecting
(05:43):
tax payers, right so at the end of the day,
you don't want to make sure that you're spending money
and these promises don't come true. But it's a very
creative idea to say. It has, you know, taking this
pot of money that's been sitting there, people aren't looking
at it, and it has the actual disi effect Mike
of people of all of a sudden started claiming their
(06:04):
funds again because it's like, hey, it's because of the press.
You know, people are actually realize they have money that
has been sitting there. So it's kind of a double
win if you will returning value to taxpayers and Ray.
Speaker 1 (06:17):
There's been study after study after study that says new
stadiums do not significantly boost local economies. They just don't
generate the new money that they promised they I believe
they re just redistribute existing spending. And then there's the
opportunity cost. Every dollar spend on these stadiums, that's a
dollar that won't go to roads or schools, or healthcare
(06:38):
or housing. So we're going to do more on this
next week on the Cleveland Browns The other piece is
the relationship between school funding and property tax relief. Ray
break that down for us. That is really comes down
to if schools have a surplus of cash and that
that money should go to offer some property tax relief.
Speaker 2 (06:59):
In Ohio, Yeah, that's right. I mean we have seen
I mean, right now, let's face that we have voters
outraged in a level throughout parts of the state that
just hasn't happened in decades. Right They're trying to put
a constitutional amendment to amend the property tax because every
time somebody opens their property tax bill, they're shocked at
how high taxes are. And so what they're trying to
(07:22):
do right now is force a school discs to say, hey,
if you have cash reserves over a certain limit and
a Senate in the House, we're going to talk about this,
and this is like thirty to fifty percent of their
operating you need to give that money back to taxpayers.
You can just keep collecting property taxes putting stuff on
the ballot if you have more cash surplus than maybe
(07:46):
the state has. And that's one of the big reforms
that you're going to try to do to keep property
taxes down. There's a lot of other good pieces. That's
going to make it easier for voters to actually look
at what they're voting for in the property tax and
actually understand it, because you know, the they throw charms
around like millage inside, millage, twenty mil, floor ten mil.
(08:09):
For most voters, heck, I don't have a hard time
understanding that, Mic and huh. And the consequence is, you know,
you see taxes a one way ratchet, and so it's
no surprise that people are trying to eliminate the property
tax because people are saying, Hey, I'm paying all this
tax dollars, I'm not sure I'm getting the services that
(08:31):
I'm paying for, and they have all this money already,
why does my tax bill keep going up?
Speaker 1 (08:36):
So overall, you at the buck Eye Institute, you're happy
with the budget. I mean no, as you point out,
there is no perfect budget, but this version of it
you're good with. What do we think that the House
is going to do before it gets to the Governor's desk?
Speaker 2 (08:49):
Well, you know, I'm hoping that the House will take
a look at the flat tax and agree with that. Again,
you know, that makes it harder to raise taxes in
the future because every taxpayer knows that their taxes are
going to go up, right, so it keeps voters informed
in being stewards of the physical because they know any
(09:09):
spending increase, you know, any tuck of tax increase, everybody's
effective equally. So I'm hoping the House keeps that. I
would anticipate a lot more being done on property tax.
The school funding issue is going to be there, and
of course the Brown Stadium. So there's a couple of
key issues that are still going to work out. But
I think, you know, both House and Senate have had
(09:30):
a good working relationship, so I would anticipate a strong
pro growth budget being sent to the governor at the
end of the month.
I want to talk a little bit about the state budget.
It was passed by the Senate yesterday. This happens every
couple of years, and you know this stuff can get
kind of wonky. But this budget specifically has a lot
of I think ground level items in it, forward facing
items that people should be you should be interested in it.
(00:20):
It's not as wonky as previous budgets in my view.
But here to break it down from the Buckeye Institute,
it's Ray Headerman. Ray, thanks for the time this morning.
I know you're busy. You've had a chance to look
at the version that the Senate passed on the state budget.
Here before we kind of pull out a couple of
specific items and discuss them. Give us your overall look
and overall thoughts on the state budget as you see
(00:43):
it that the Senate passed.
Speaker 2 (00:45):
Yeah, this budget really positions Ohio to be a leader
in the Midwest. We're going to be able to drive
forward with economic progress. We're going to be able to
bring companies to Ohio and reward workers. We're going to
make it easier for businesses to stuart up. We're going
to make it easier to educate our children. And I
think it's a budget that positions Ohio for the economic
(01:07):
future the next thirty years.
Speaker 1 (01:09):
So one of the things that people have their eye
on is some of the tax changes, shifting to a
flat income tax, where everybody pays two point seventy five
percent income tax except for low income earners. Those folks
are exempt. Some of the criticisms are that it gives
wealthier earners a break. Anybody over one hundred thousand dollars,
(01:31):
their tax rate goes down. So talk about the notion
of a flat tax in Ohio.
Speaker 2 (01:37):
Yeah, So this is a piece of reform that's been
ongoing for several years. You know, Ohio used to have
eight tax practice, very confusing, and with this budget, we
would only have one at two point seventy five percent rate.
You know, we've seen a lot of states moving to
a flat tax. A lot of our neighbors are Michigan,
for example, already has a flat tax, and then some
(01:59):
of them can he need to move forward to eliminating
the income tax because states want to make sure that
there's competitive as possible. So this budget would drop the
top rate, make sure that everybody pays the same rate
at two point seventy five. The other thing, Mike, and
this gets a little wonky is it gives everybody an
(02:20):
additional tax break because when you start paying the first
tax dollar of income tax, your tax liability goes from
zero to three hundred and sixty dollars because of an
artifact from previous tax reforms. And what they're going to
start doing is they're going to start lowering that three
hundred and sixty dollars amount. So when you're a low
(02:42):
income wage earner, you start paying an income tax instead
of paying a tax on your first dollar, you have
that three hundred and sixty dollars wamp some payment. You
want to make sure that we're not discouraging people. So
we're going to start lowering that rate. And that means
everybody's been a sitting from this tax reform if paying
income tax.
Speaker 1 (03:01):
So there are the critics of the flat tax, primarily
Democrats in this situation are warning that it could reduce
funding for services or police and fire and so forth.
How do states that have well no income tax or
flat tax recoup any kind of losses that they would
get with the reduction in tax?
Speaker 2 (03:23):
Yeah, you know, we have always said if you're going
to move forward with tax reform. You need to do
it in a responsible fashion, and you need to pay
for tax reform. And the Senate has come out with
a lot of good tax policies and ways to pay
for it. For example, they're eliminating a lot of tax
credits that only go to certain businesses or certain people
if they're doing certain types of behavior. This is good
(03:45):
because you want a tax code that rewards everybody, right,
you want to make sure that you're incentivizing every business.
You're not just giving it to a big businesses. You
want to make sure that everybody's playing by the same
rules and that that's a great way to move forward
and pay for these tax reductions. The other thing the
Senate budget does is it starts slowing and spending on
(04:07):
certain items. You know. We know medicaid is the second
largest piece of the budget the state pays for after education.
It slows the future growth of medicaid. So those are
proven tax reforms, and what we've seen is that states
you know, that have low tax codes keep a tight
brain on their spending. They look at better ways to
(04:28):
raise revenue, and they make sure, you know, their tax
code doesn't have a lot of special interest loopholes. And
I think the Senate budget starts closing those speaking.
Speaker 1 (04:38):
With the Ray Headerman the Buckeye Institute talking about the
state budget proposal by the Senate that has passed, the
House still needs to put their fingerprints on it before
it goes to the Governor's desk the end of the month.
One of the things that I in this budget that
I have been critical about is the Cleveland Browns Stadium
funding piece to this. And you know, say what you
want about the Browns on the field. That's a separate discussion.
(05:00):
But you know, six hundred million for brown Stadium from
and now they've changed. They changed this, and it makes
me feel a little bit better. They want to use
unclaimed funds, which is you know, old uncash paychecks or
you know, deposits and you know money that has been
sitting there unused for over a decade. How do you
feel about that? I kind of like that better than
using bonds.
Speaker 2 (05:21):
Yeah, you know, I think it's a creative way to
basically address this issue. I mean, we always have concerns,
you know, anytime you know, the state government starts offering
its dollars for these types of projects, So you want
to make sure that you know, the state government is
holding these entities, you know, to their promises and protecting
(05:43):
tax payers, right so at the end of the day,
you don't want to make sure that you're spending money
and these promises don't come true. But it's a very
creative idea to say. It has, you know, taking this
pot of money that's been sitting there, people aren't looking
at it, and it has the actual disi effect Mike
of people of all of a sudden started claiming their
(06:04):
funds again because it's like, hey, it's because of the press.
You know, people are actually realize they have money that
has been sitting there. So it's kind of a double
win if you will returning value to taxpayers and Ray.
Speaker 1 (06:17):
There's been study after study after study that says new
stadiums do not significantly boost local economies. They just don't
generate the new money that they promised they I believe
they re just redistribute existing spending. And then there's the
opportunity cost. Every dollar spend on these stadiums, that's a
dollar that won't go to roads or schools, or healthcare
(06:38):
or housing. So we're going to do more on this
next week on the Cleveland Browns The other piece is
the relationship between school funding and property tax relief. Ray
break that down for us. That is really comes down
to if schools have a surplus of cash and that
that money should go to offer some property tax relief.
Speaker 2 (06:59):
In Ohio, Yeah, that's right. I mean we have seen
I mean, right now, let's face that we have voters
outraged in a level throughout parts of the state that
just hasn't happened in decades. Right They're trying to put
a constitutional amendment to amend the property tax because every
time somebody opens their property tax bill, they're shocked at
how high taxes are. And so what they're trying to
(07:22):
do right now is force a school discs to say, hey,
if you have cash reserves over a certain limit and
a Senate in the House, we're going to talk about this,
and this is like thirty to fifty percent of their
operating you need to give that money back to taxpayers.
You can just keep collecting property taxes putting stuff on
the ballot if you have more cash surplus than maybe
(07:46):
the state has. And that's one of the big reforms
that you're going to try to do to keep property
taxes down. There's a lot of other good pieces. That's
going to make it easier for voters to actually look
at what they're voting for in the property tax and
actually understand it, because you know, the they throw charms
around like millage inside, millage, twenty mil, floor ten mil.
(08:09):
For most voters, heck, I don't have a hard time
understanding that, Mic and huh. And the consequence is, you know,
you see taxes a one way ratchet, and so it's
no surprise that people are trying to eliminate the property
tax because people are saying, Hey, I'm paying all this
tax dollars, I'm not sure I'm getting the services that
(08:31):
I'm paying for, and they have all this money already,
why does my tax bill keep going up?
Speaker 1 (08:36):
So overall, you at the buck Eye Institute, you're happy
with the budget. I mean no, as you point out,
there is no perfect budget, but this version of it
you're good with. What do we think that the House
is going to do before it gets to the Governor's desk?
Speaker 2 (08:49):
Well, you know, I'm hoping that the House will take
a look at the flat tax and agree with that. Again,
you know, that makes it harder to raise taxes in
the future because every taxpayer knows that their taxes are
going to go up, right, so it keeps voters informed
in being stewards of the physical because they know any
(09:09):
spending increase, you know, any tuck of tax increase, everybody's
effective equally. So I'm hoping the House keeps that. I
would anticipate a lot more being done on property tax.
The school funding issue is going to be there, and
of course the Brown Stadium. So there's a couple of
key issues that are still going to work out. But
I think, you know, both House and Senate have had
(09:30):
a good working relationship, so I would anticipate a strong
pro growth budget being sent to the governor at the
end of the month.
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