The Republican controlled legislature and the Governor have determined that the state budget will be balanced on the back of public education and the middle class. Much of the solution will pass the buck to local government and school districts, by eliminating the tangible personal property tax (TPP) replacement money, leaving many school districts in dire straits. Further costs are passed onto working Ohioans with a 2% pension shift, directly extracting hundreds of millions from paychecks over the next 2 years alone. A significant portion of the money that is left over for public education is diverted to expand charter schools and vouchers. A plan even conservative charter proponents oppose. Much of the rest of the budget gap is filled with one time money from the privatization of Ohio's assets, from roads and prisons, to the lottery and alcohol.
Clearly a more balanced approach would be welcome.
A short while ago we discussed and demonstrated that the income tax cuts made through HB66 in 2004 has had a negligible effect on a typical teachers tax burden. For those tax cuts to make a real tangible difference one would have to earn significantly more than any Ohio teacher - hundreds of thousands of dollars more in fact.
A recent study by the Education Tax Policy Institute (ETPI), found
that Ohio ranks as the 17th lowest state in taxes levied at the state level. Increases in local taxes place Ohio with a total state and local tax burden at about the national average. Ohio's ranking among states is higher when local taxes are included in the comparison because state policies have shifted the responsibility for funding public services, including education, down to the local level.
While the study determined that the reform of Ohio's business tax structure in 2005 improved both the fairness and the competitiveness of the state's revenue system, the authors also determined that the combination of the recent recession and the changes in the state’s tax system in House Bill (HB) 66 lowered state revenue by $3 billion below the levels anticipated in 2005 when the state revamped its business tax structure.
The summary can be read here, with the full report is below. The report demonstrates that Ohio does not have the crushing tax burden that some would have us believe, but instead has areas where improvements could be made that would raise revenue without causing any economic harm.
The following two charts from the report show the sources of tax revenue, the first for the state, the second for local taxes.
State Sources of Tax Revenue
Local Sources of Tax Revenue
As you can see, business pays very little, with the vast majority of taxes being paid by individuals through income tax, property tax and sales taxes. One would hardly have to be draconian to realize significant tax revenues from simply closing outdated loopholes
COLUMBUS, Ohio - Ohio's cash-strapped government could generate an additional $300 million a year by closing tax loopholes that are outdated, benefit a few or do little to spur economic growth, a trio of policy think tanks spanning the political spectrum told state leaders Monday.
You can see some of the crazy tax loopholes in this document
The Tax Expenditure Report Ohio
In total those tax exemptions add to over $7 billion.
The evidence is overwhelming that an alternative, more balanced approach to the budget is available to law makers should they choose. They do not have to continue on this path that seriously harms public education and the middle class. They can solve the budget problems without passing the buck down to local government. The question is, will they chose a new path?
REVENUE OPTIONS FOR OHIO’S FUTURE