Ohio loses over $3.5 billion a year in revenue after a decade of tax cuts. In return, Ohio students have seen budget cuts and tuition hikes. Since 2000, Ohio has cut state investment per student by more than 43%. While other states have seen a decline, the national decline of investment is only 23%.
During recent budget debates, we heard some state policymakers acknowledge that we need to reduce tuition for students. To an extent, we have started to do that – since 2013, tuition in Ohio has been reduced by 1.8% – a good start, but we are still $500 million below 2008 funding levels.
More than 10 years of income tax cuts haven’t helped Ohio’s economy, but an investment in college affordability might do the trick. Affordable college will keep students here in Ohio, and attract the best and the brightest from neighboring states. Students graduating with less debt will be more likely to buy a car, house, or start a business because they don’t have a giant debt burden weighing them down.
Instead of a race to the bottom of the states, let’s race to the top!
Sadly, many of our neighbors are struggling to get by. The State of Ohio has the opportunity to do great things – like end hunger in our communities.
HERE ARE THE FACTS:
- About 1 in 4 kids struggle with hunger in Ohio
- Ohio ranks near the bottom (47th) for food insecurity.
- Since 2002-20004, hunger in Ohio has increased about 48%.
Feeding America estimates that it would cost about $885 million a year to end hunger in Ohio. While that sounds like a lot to you and me, it is a reasonable amount for our state government. After a decade of tax cuts, primarily benefiting the wealthiest Ohioans, our state operates with $3.5 billion less in revenue. We could have ended multiple times over by now.
We can end hunger and much more when we invest in Ohio’s future.
As the Ohio Legislature wrapped up the Ohio FY 16-17 budget (HB 64) in June, they rushed to include a tax cut for business owners that was criticized by progressive and conservative economists as a poor strategy to create jobs, likely to lead to tax avoidance, and a major tax loophole. The tax cut will exempt business income from state income tax – up to $250,000. Income above that will be taxed at a flat 3% rate.
It is no surprise that in the rush to provide more tax cuts, they legislation was poorly drafted. In calendar year 2015 only 75% of business income will be tax free. That means the other 25% will be taxed at a 3% rate – raising taxes on most small businesses.
The legislature, through HB 326 and SB 208, will apply the progressive tax structure to that 25% of income through the current tax code. They unintentionally have shown the reality of what a flat tax means – massive tax cuts for the wealthiest Ohioans, while small businesses pay more.
If a flat tax is applied to all Ohio taxpayers, we can expect fewer resources invested in our schools and communities, higher taxes on most Ohioans and massive tax cuts for the wealthiest.
The Ohio Senate Finance Committee passed their version of the Ohio budget yesterday – June 17th – in the early evening. One Democrat Amendment was agreed to by majority Republicans. The content of the amendment will create a tax expenditure review commission in the state of Ohio. This new committee will review tax loopholes periodically to see if they are accomplishing their purpose or a tax give-away to the politically well connected. This is a policy the Governor originally proposed in his budget and has long had public support from tax policy experts from the left and the right.
This is a small victory compared to tax cuts of $1.7 billion that should be invested in schools, local governments, and infrastructure. Hopefully the tax expenditure review commission will review poorly targeted tax credits and loopholes – such as the expansion of the business tax cut proposed by the Ohio Senate – and realize that it is ineffective at job creation, leads to an unfair administration of Ohio taxes, and may lead to tax avoidance.
The Ohio Senate provided a quick glance at their budget priorities on Monday morning. Once again, the Senate is doubling down on tax cuts that will primarily benefit the wealthiest Ohioans, instead of investing adequately in great public services that strengthen our communities.
In February, the Governor proposed a massive tax shift that would have raised nearly $5 billion in new revenue to pay for a $5.5 billion tax cut. This plan would have raised taxes on low and middle income Ohioans to pay for a tax cut for the wealthiest.
In April, the House rejected that plan and passed a 6.3% income tax cut – instead of investing to reduce tuition, provide more affordable housing, or fix Ohio’s crumbling infrastructure. We could do a lot with a billion dollars. While new taxes on low and income Ohioans were removed, the tax cut focus remained.
The Senate wants to increase the House tax cuts for businesses and keep the 6.3% income tax cut. In all, the Senate will forego $1.7 billion in revenue that could otherwise be invested in opening closed recreation centers, fixing our roads, or adequately funding our education system. The Senate will also raise tobacco taxes by 40 cents a pack and were unable to reach a compromise on Ohio’s severance tax.
Senator Shannon Jones sponsored an amendment that was included to restore healthcare funding for pregnant women up to 200% of the poverty level. There will be additional money placed into higher education, and the Senate will guarantee that no school district loses funding next year. However, the details of these plans have not been released for us to know what is going to be cut, and how these funds will actually be allocated. Follow us on Twitter for more updates.
New research out today finds that only 30% of business executives actually knew they were receiving a tax credit for “engaging in qualified job creation, machinery and equipment investment, research and development investment, and other activities in the state.”
When we think about it fully, this makes sense. Businesses will hire more staff only when they need additional people to meet demand, not because they have extra cash laying around. That extra cash from the incentive is profit. Businesses continue to report that access to a highly skilled workforce, infrastructure, and markets are the common needs considered in location decisions. In the analysis, on a scale of 19 factors, business executives ranked tax incentives as 15th (those not receiving the credit) and 16th (those receiving the credit).
We need all businesses to pay their fair share, instead of creating loopholes for those with good lobbyists.
The Ohio House of Representatives passed HB 64 on Wednesday April 22nd by a mostly party line vote 63-35. The legislation builds on a decade of income tax cuts that primarily benefit the wealthiest Ohioans. The cost of the 6.3% income tax cut is $1.2 billion over the biennium. Since 2005, Ohio has cut the income tax repeatedly, and Ohioans have fewer jobs, smaller paychecks, and a higher poverty rate. We could make major investments into education, infrastructure, public health, and other great public services that strengthen our communities.
We are also disappointed that the Ohio House removed language establishing a tax expenditure review commission and an appropriate severance tax. The Ohio Senate now has the opportunity to build on the House’s work related to investments in education (including pre-K and higher ed), local government, and community services.
Ohio House Republicans introduced their budget amendments earlier this week, and held three days of public testimony. Many parents, students, and school administrators showed up to testify against the elimination of TPP reimbursements.
TPP stands for Tangible Personal Property, which refers to a type of property (such as machines in a factory) that would be subject to local property taxes. As a part of the 2005 tax reform package, the state eliminated property taxes on tangible personal property. This dramatically reduced the amount of taxable property in most school districts, leading to major losses of revenue.
In 2005, policymakers recognized that this would put a huge hole in many school districts budgets and promised to reimburse local communities for those lost funds. However, those reimbursements have been reduced from the original promise, and the Governor’s budget proposed eliminating those funds. The House modified the Governor’s proposal, but 93 school districts still lose money. When the state has a budget surplus – how can we justify cutting funds for our schools? The state will use this money to finance an income tax cut for the wealthiest Ohioans – leaving local communities to cut services to students or increase local property taxes.
16% of Ohioans are in poverty.
Nearly 2 million Ohioans struggle to put food on the table.
Tuition is rising, and
Paychecks are stagnant.
The Ohio House introduced their version of the budget earlier this week and they continue to follow the same failed strategy – tax cuts that will primarily benefit the wealthy. The House Republicans proposed a $1.2 billion income tax that will prevent the state from addressing poverty, reducing tuition, and fixing our failing infrastructure.
Write your legislator a quick email and ask them to invest in our communities and not tax cuts that simply don’t work!