News
8:38 pm
Mon August 18, 2014

Think Tank Says Ohio Tax Policies Favor The Wealthy

Ohio lawmakers began income tax cuts back in 2005 and they have continued to cut those same taxes even in recent years.

But sales taxes have increased. And some taxes that were paid years ago have been eliminated and replaced with new ones. A progressive-leaning think tank has taken a look at how the changes have affected Ohioans. And in an interview with Ohio Public Radio’s Jo Ingles, Zach Schiller of Policy Matters Ohio says the  changes disproportionately benefit wealthier Ohioans. 

Schiller – “When you look at the major tax changes over that time period, the top one percent of people, the most affluent Ohioans, got a tax cut that amounts to about $20,000 a year while the people on the bottom 3/5, taken as a group, saw an increase.

Ingles – “Now people on the other side would say the people on the bottom did not see an increase because we have given them tax credits and other incentives during that time.  Did you take any of those things into consideration?”

Schiller – “Yes, we did. This includes for example, the tax credit that was passed under Bob Taft in 2005 as well as the more recent institution of an earned income tax credit.  And what you find is that while those certainly did reduce taxes for lower income Ohioans, the fact is that low income people pay most of their state and local taxes in state, excise and property taxes.  We have a progressive income tax so when you cut the income tax across the board, most of it goes to affluent people and it doesn’t do a whole lot for people who don’t make much.  In fact, there is a modest cut in income taxes even for the lowest income Ohioans but it is more than overwhelmed by the other tax changes like the increase in the sales tax.”

Ingles – “Now Ohio’s corporate franchise tax was eliminated.  How did that play out?”

Schiller – “Well, the corporate franchise tax was the name for our corporate income tax.  We are now one of six states in the country that does not have a corporate income tax.  So what you find in our analysis is who ends up paying these taxes so when you cut it, and the corporate income tax was paid more by affluent taxes so when you cut it, you are helping to reduce their taxes.  And some of it was paid by people who are out of state.  But in the end, what we did is cut taxes pretty significantly.  All of these things together wound up being a three billion dollar a year tax cut and people on the bottom end, as a group, did not do so well.

Ingles – “You know the theory behind cutting these taxes is that it will entice more businesses to come to Ohio and it will create more jobs.  But you are not seeing that?”

Schiller – “Well, between June 2005 and just last month, Ohio lost a total of 126,000 jobs or 2.3 percent of the total.  During that time period, the country as a whole gained more than 5 million jobs or 3.8 percent.  And most of us are well aware that the recovery nationally has been slower than we’d like and the job growth hasn’t been as great as with previous recoveries.  So here, over that time period, Ohio actually saw a loss and over the most recent year, we have also seen comparatively small job growth in Ohio either by historical standards or compared with the rest of the country.  So I don’t think you can make a convincing case that the tax cuts (….have allowed Ohio to out perform the country.  Clearly, they haven’t.”

Most Ohio lawmakers who support the new tax reform say they realize Ohio is not out of the woods yet but they believe those new policies need more time to work. In a recent statement, Governor Kasich’s Spokesperson, Connie Wehrkamp  said the jobs-friendly policies championed by the Governor are working, evidenced by the fact that Ohioans have created a quarter million private sector jobs since he took office after losing 350,000 under the previous administration.