The Standard & Poor’s (S&P) released a report on Sept. 15th highlighting the impact of economic inequality on state revenue. Their findings conclude that state revenue growth has declined in recent years as a result of this inequality. Most notably, states that are more reliant on sales tax see a larger impact from inequality on state revenues, while states with a progressive income tax are able to partially offset the impact of inequality on their state revenues.
The research analyzes data from 1950-2012 and concludes that slower state revenue growth is a structural problem connected to economic inequality and not a result of normal economic cycles. From 1950-1979, states averaged growth of 9.97% and since 2009 states average growth of 4.36%. State income tax cuts have not produced the promised economic growth over the past decade.
This report along with many others should lead Ohio’s leaders to re-think our 10 year trend of cutting Ohio’s personal income tax. A balance of revenue sources is needed for states, like Ohio, to maintain responsible fiscal policy and address slumping and volatility in revenues. An income tax cannot solve inequality on its own, but through smart public investments in schools and community services, Ohio can create the opportunities for all Ohioans to succeed.