Ohio court rejects non-highway use of fuel taxes

Taking money collected on gasoline sales by the state's updated business tax and spending it on anything but highway-related programs unconstitutional, the Ohio Supreme Court ruled Friday as it accepted arguments that the tax is wrongly diverting $140 million annually from fuel sales to non-roadwork accounts for schools and cities.
Associated Press
Dec 8, 2012

 

Builders, contractors, construction companies and engineers had sued over the tax, claiming that Ohio voters have repeatedly rejected the notion of diverting taxes raised from fuel sales to non-road work.

The court said in a 6-1 decision that the Commercial Activity Tax still be applied to companies that make money selling fuel, but it can't be diverted into the state fund that pays for everything from schools to health care for the poor. They came to a different conclusion three years ago in a similar lawsuit brought by grocers over the tax's application to grocery store food sales.

The Ohio Constitution "explicitly prohibits the expenditure of revenue derived from excises on motor-vehicle fuel for any purpose other than highway purposes," Justice Robert Cupp wrote for the majority.

The state can still collect the money but can't spend it until the General Assembly passes a law adjusting what it can be constitutionally used for, Cupp added.

The office of Ohio Gov. John Kasich, which must produce a balanced two-year budget early next year, is reviewing the decision, said spokesman Rob Nichols.

Groups opposed to the tax had argued the Ohio constitution bars money raised from the sale of fuel from being used on anything but highway upkeep.

"The diversion of any of these excise taxes undermines the will of the people to preserve the Motor-Vehicle-Fuel-related excise tax base for public road repair and construction," Anthony Ehler, an attorney representing both construction companies and county engineers whose budgets rely on fuel taxes, said in a March 20 court filing.

At issue is a 2005 rewrite of Ohio's tax code that taxes a wide variety of business activity, not just a company's revenue.

Lawmakers approved the tax as an alternative to the state's former business tax, which was criticized as having high rates but numerous loopholes — it was sometimes dubbed a "Swiss cheese" approach — that reduced its ability to raise revenue.

The new tax is low — 0.26 percent — but is applied to as many businesses as possible with fewer exemptions.

The debate doesn't involve the 28-cent state gasoline tax, whose revenues are distributed automatically to the state, counties and local governments for road work.

The state argued that the CAT is not on gasoline itself, but on companies that make money selling fuel. It also said opponents of the tax are disguising their objections to paying it "as a crusade to save highway spending."

"The CAT relates to doing business, and it does not 'relate to' motor fuels any more than it relates to selling food, widgets, or anything else," Stephen Carney, an assistant Ohio attorney general, said in a May 9 filing with the court.

In 2009, the court ruled the state could continue to collect the same tax when it's applied to grocery store food sales. In a 6-1 decision, the court upheld the collection of the CAT on food sold by grocery stores and others for off-site consumption. The Ohio Grocers Association had argued that applying the tax to food sales violated the state constitution, which prohibits sales tax on the sale of food that's taken off store premises to eat.

 

Comments

SamAdams

I'm pleased to see the court's ruling in this case. This is a typical government maneuver: Raise taxes for a stated specific purpose, one that voters agree is worth the taxes, and then spend it elsewhere on things voters may NOT agree is worth the taxes. Combine that sleight-of-hand with the government's unwavering ability to spend, spend, spend, and spend, and it's pretty clear SOMEbody needed to step in and hit the brakes!

Don S

Why isn't Kasich going to jail ??? Misappropreation of funds is still a crime, isn't it ???

Contango

More fuel-efficient and alt-energy vehicles, plus economic downturns have reduced the amount of gas taxes that the state is collecting.

Different methods of garnering revenue for highway construction and maintenance must be found.

Raise the state gas tax?

A per-mileage use tax?

An auto ins. tax?

Privatize the OTP?

Sumpthin’s comin’….

cam

Contango read the article again. If the money was used for what we voted it to be used for there would't have to be as many ways to look for money for highway improvements. Don S hit it right on the head. Kasich should be under investigation. If this was a Dem in office all you repubs would be screaming and calling for his head. But seeing how it is one of your own not a word will be said. Same theory as always with you guys. Do as way say or we will throw a fit don't do as we do because that is ok. Amazing. If this was Obama or another Dem fox news would have it as headlines wanting the Gov arrested. But it is a repub Gov so nothing.

deertracker

Yea, what Cam said!

Contango

@ cam:

Read the article -

"The debate doesn't involve the 28-cent state gasoline tax, whose revenues are distributed automatically to the state, counties and local governments for road work."

"But the fact is that we're facing a funding crisis in Ohio. Last January, we determined that there is a $1.6 billion funding shortfall for construction projects. Those are projects that have been vetted through the approval process and are ready to go to construction, and yet we don't have enough money to build them.

In addition to that, another $10 billion worth of future projects are in the development process, but for which there is no money."

- Jerry Wray, Director, Ohio Department of Transportation

http://reason.org/news/show/ohio...

Independent; not a Repuke or a Dim

jas

Absolutely agree. Why isn't the Attorney General investigating the Governor's illegally diverting highway funds? We wouldn't have this problem if the GOP had actually worked on resolving the school funding problem the Ohio Supreme Court told them to do instead of sitting on their hands doing nothing. The GOP likes to talk a good game but when they get in office, they refuse to actually govern and create gridlock. It's happening in both Columbus and Washington. Make big speeches but do nothing to solve problems. Those problems don't magically resolve themselves like the GOP seems to think.

Contango

@ jas:

"Solve problems"?

Seems like Gov. Kasich and the boys and girls are cleaning up Gov. Strickland's budget deficit.

See how decades of Dim govt. has bankrupted IL and Detroit.

"School funding problem"? Just tax the rich, right?

The Big Dog's back

John Mathias Engler (born October 12, 1948) is an American politician and a member of the Republican Party. He served as the 46th Governor of Michigan from 1991 to 2003.

The Big Dog's back

During that same time period ('91 to '03) there 3 Repub Governors in Illinois.

Contango

When did Detroit last have a fiscally conservative mayor and city council?

No comment on IL?

KURTje

Speak that truth cam. Others hate facts.

Swamp Fox

The law was enacted in 2005 and become part of the state budget in 2006. Who was governor for 4 of these years, Teddy Strickland (D), who left us with a $8 billion dollar budget deficit..

SamAdams

To those who suggest Governor Kasich be investigated: If he had diverted funds in defiance of the law (or had appeared to do so), I'd agree. But it LOOKS like the funds were diverted in accordance with an earlier comparable court case, and that in light of the most recent decision, the state is reviewing the implications.

Is what Kasich's administration did okay? Not really. Was it illegal? Doesn't sound like it. All that that does is put the Kasich administration on a par with just about every other political entity. Anybody who suggests that BOTH Democrats and Republicans don't lie don't lie or at least obfuscate for their own agendas is a liar themselves.