May Be Too Soon To Cut Income Tax in Ohio

Ohio Governor John Kasich wants to raise taxes on natural gas extraction and correspondingly lower income taxes. The Senate President, Tom Niehaus, is not so sure about this trade-off though. Kasich is concerned about how uncertain federal funding is, especially for Medicaid. If Ohio cuts back on income tax, the state could be in real trouble if the federal government then decides to cut more funding for Medicaid.

Currently, Medicaid is jointly funded by the federal government and the state government. Paul Ryan’s Republican budget plan would make the program a block grant. The federal government would send an amount of cash to the states and the state would have to pay for 100% of the costs that exceed that amount of cash. The block grant plan will shift a large amount of Medicaid costs to states, which means that states will need to increase taxes and cut back on other governmental programs. If this is the case, Kasich’s proposal may be untimely. While this is not a problem yet because Democrats still hold the White House and at least one house of Congress, Medicaid adjustments will likely be coming in the next few years.

See Josh Barro, How Federal Medicaid Cuts Will Squeeze States, Forbes, Mar. 26, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.