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Eroding the foundation

erroding roadOhio has cut our state income tax 7 times in 10 years. The foundation of a strong economy continues to be reliable infrastructure, an educated workforce, and safe communities. Tax cuts erode our public investments in things like roads, schools, and public safety services. On Monday October 20th, legislation was introduced (HB 639) that will eliminate Ohio’s income tax over the next 10 years.  Elimination of Ohio’s income tax will cost Ohioans over $8 billion a year in public investments.

Since the 2005 tax cuts, Ohio has lost jobs and reduced spending on education, community services, and public safety in our local communities. Tax cuts simply have not worked.  Before any further tax cuts in Ohio – let alone eliminating the revenue entirely – Ohio should decide what kind of state we want.  Ohio could strengthen the foundation of our communities and economy by reducing college tuition, expanding pre-school access, and making our communities safer. Common sense public investments, like these and others, will strengthen our communities and improve the quality of life for all Ohioans.

 

Did you see the numbers?

numbersOhio’s poverty rate is down to 16.0% for 2013 from 16.3% in 2012. Ohio gained 200 new jobs last month and unemployment stayed the same. More Ohioans have insurance than before, but many Ohioans are still going hungry…and on and on and on.

All the numbers can become mind-numbing and lost in translation. Here is the big thing we take away from all the numbers that have recently been released – people are still struggling to get by. College debt, school fees, childcare, car repairs, and much more are making it more and more difficult for more Ohioans to get by day-in and day-out. Is this level of struggle for many Ohioans the New Normal? We can’t accept a 16% poverty rate to be celebrated.

10 years ago we cut taxes, and Ohioans were told that this would help our state create jobs and then more people would have opportunities. The wealthiest 1% of Ohioans are paying nearly $20,000 less than they would have, and the majority of us are actually paying more in taxes to maintain our roads, schools, parks, and basic public services. Tax cuts simply didn’t work. Poverty is up, jobs are down, and people are struggling.

If Ohio begins to invest wisely into efficient and effective services, we can make a difference. Ohioans would feel the investments in higher educaiton, preschool, and parks and recreation very quickly for those directly impacted by those services. Those improvements will spread throughout the entire economy as families are more economically stable and people have the opportunities for success.

Inequality slows state revenues – income tax part of solution

money scalesThe 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.

Cuts add up to big impact on local communities

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State decisions impact our local communities. As a result of state budget cuts, many communities have cut hours at rec. centers, reduced police and fire department staff, and cut services for those most in need. The Cincinnati Enquirer (Gannet News) compiled the numbers to compare local government revenues. As a result of state decisions, local governments and schools have lost nearly $2 billion since 2011.

 

What did the state do? 

      • - 50% cut to the Local Government Fund
      • - Cut TPP reimbursements. (The Tangible Personal Property (TPP) tax allowed local property taxes to be levied on equipment and machinery. In 2005 the state eliminated that local tax, but guaranteed to help local governments transition their tax base). These reimbursements were cut in 2011.
      • - Elimination of the estate tax in 2013
      • - Phase out of the utilities tax (started in 2007).
      • - Eliminated a 12.5% property tax rollback on future levies.

“The Cuts Were Small – you can handle them.” – Governor Kasich. Local communities lost nearly $2 billion. This is a substantial amount of money spent primarily on income tax cuts for the wealthy that do little to benefit the rest of the state.

While the Local Government Fund doesn’t finance the majority of a city’s operations (the cut  amounted to a 3-5% loss for local communities), it accounted for revenue to invest where the local community needed it. These funds were used to keep rec. centers open, provide services to at-risk teens, or financed activities to senior citizens. A 3-5% cut dramatically reduces or eliminates these programs. 3-5% cuts matter.

Likewise, the elimination of the estate tax was not, by itself, a devastating blow to local communities, (we can’t count on wealthy individuals dying for annual budget solvency), but many communities used this revenue to replace aging equipment (like fire trucks), or restore the neighborhood park and playground. Without these funds, those fire trucks aren’t replaced and playgrounds and ball fields aren’t updated.

Small cuts to communities lead to big impact for community services.  Yes, as a result of a growing economy, increased income and sales tax revenues have helped many communities.  Many Local communities weathered state cuts by making their own cuts and raising taxes at the local level. Forgone maintenance, suspended cost-of-living adjustments, reduced hours of operation, and under-staffed offices are the new normal. These cuts continue to ripple throughout our state.

New investment is needed. Nearly 1 out of 4 of Ohio’s kids are in poverty.  With many unmet needs in our communities and across Ohio, we need to find new ways to invest in Ohio’s future. Budgets are more than balance sheets and acronyms. Budgets matter to the people who are part of the community. We all benefit from great public services that strengthen our communities.

 

 

News and Notes August 28, 2014

3 points 10 yearsNews: Think Tank says Ohio tax plan favors the wealthy, WCBE News

News: Tax Shift and Shaft, Toledo Blade

Notes: We need to rethink the 2005 tax changes and evaluate what is working and what is not. Income tax cuts have not created the promised jobs or increased resources for low and middle income Ohioans. Ohio has fewer resources to invest in our communities and many Ohioans are actually paying more in taxes. It is time to get Ohio back on track.

Which Path will Missouri Choose?

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Two roads diverged in a yellow wood,

And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth; 

The state of Missouri will have the opportunity to vote on a sales tax increase to specifically fund infrastructure. I do not know all of the in’s and out’s of Missouri budget and transportation policy, but many of the issues in Missouri and similar to those across the nation.

1. Gas Tax Revenue: 
The gas tax just hasn’t kept pace with the cost of infrastructure. Cars need less fuel, and therefore pay less tax on fuel, and this leads to less revenue to maintain those same roads and bridges. Do states need to raise gas taxes to account for more fuel efficient cars?

2. Alternative transportation:
States have invested heavily in roads designed for cars and must invest heavily into maintenance of these roads.  Should states and localities look at new investments that may impose a high upfront cost but lower maintenance costs down the road?

3. Who Pays?
Families struggling to get by pay a larger share of their income toward sales taxes than the wealthy pay. Will sales tax increases be the right way to fund infrastructure or should revenue from a higher gas tax be mixed with income tax revenues to finance these projects?

4. We need Roads
A good road is the foundation of a strong economy. We need reliable bridges in our country, states, and local communities to keep people safe and allow commerce to flow freely.

The question is, which road will Missouri take next Tuesday?

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I,
I took the one less traveled by,
And that has made all the difference.
                                                                                      – Robert Frost

Are You Paying your Sales Tax?

Screen Shot 2014-07-18 at 9.53.14 AMAre you paying your sales taxes?

Probably not, because most Ohioans don’t realize that we are required to submit Ohio Use Tax (see line 19) on items purchased online where the seller doesn’t collect. That means every time you buy a book, an i-phone case with a built-in cup holder, or an emergency mustache kit and sales tax is not collected – you are legally responsible to pay it when you file your state income tax returns.

And that makes sense….

because there is no difference between ordering a book on Amazon or walking down to the Book Loft and purchasing it off of their shelf – except the Book Loft collects sales taxes. (and they create jobs here in Ohio…) If we want Amazon to collect the sales tax owed on our order we need Congress to act.

Why is it this way?
Simply put, Ohio can’t tax companies in other states. Congress has the authority to regulate commerce between the states. Therefore, we need Congress to resolve this issue with the Marketplace Fairness Act. It is the Constitutional thing to do.

As more people use Amazon to purchase their books, local and state governments are losing revenue they need. This will lead to cuts in public services OR an increase in other taxes – likely a combination of both. Sales tax is collected by the state, county, and other entities (like a regional transportation service). All of these levels of government will struggle to continue to provide great public services that we all use.

Anti-tax organizations are afraid this is an ‘expansion of state tax authority‘ but it isn’t really. It is an effort to make the collection and remission of taxes already owed more efficient and equal among the several states.  We can all get behind real efficiency, can’t we?

 

News & Notes June 23, 2014

Screen Shot 2013-07-23 at 9.22.50 AMNews: As Ohio Expands Tax Cuts, the Poor get Poorer, Cleveland Plain Dealer
Notes: “So, today’s Statehouse irony: The tax cuts that give General Assembly Republicans a platform leave middle-class Ohioans treading water – and unfilled potholes in front of country clubs.” READ MORE

News: Tilt of the Governor, Akron Beacon Journal 
Notes: The Governor signed another tax cut last week costing the state over $400 million. 50% of the cut will go to the wealthiest 5% of Ohioans. 

News: Ohio’s Economic Recovery, Not a Simple Tale, Columbus Dispatch
Notes: The national recession and recovery have more to do with Ohio’s economy than state level decisions. Tax cuts simply have not worked in improving Ohio’s economy. In fact, Ohio is lagging much of the nation. The simple reality is that governor’s have the most impact in creating great public services that will be the foundation of a strong economy into the future. Investments into reliable infrastructure, schools, and public safety are prudent ways to grow an economy over the long term. 

News: Wages flat in Ohio, decline locally, state job growth below national average, Cleveland Plain Dealer
Notes: The unemployment rate does not reflect Ohio’s unemployment picture for Ohioans. Ohio’s unemployment rate is dropping because too many people have been unemployed for so long that we stop counting them. Job growth is slow and far too many new jobs are part-time and low wage. This will continue to drag the rest of Ohio’s economy downward. 

Governor Signs Budget Bill: 50% for the 5%

Ohio Continues a trend – Cut taxes for the wealthy and not investing enough in our communities. 

 

hb483
On Monday June 16th, Governor Kasich signed HB 483 also known as the Mid-Biennium Review (MBR). This legislation continues a decade long trend that prioritizes tax cuts for the wealthiest Ohioans. The bill cuts taxes in by about $400 million over the next 12 months (July 2015 – June 2016). Over $200 million of this cut (50%)  will go to the wealthiest 5% of Ohioans.  The poorest Ohioans will probably not receive any of this.

 

 

Tax cuts just don’t work. 

The tax changes include an increase to a tax credit for some business owners – that has no evidence showing it is effective at creating jobs. We need to review tax breaks and loopholes and keep the ones that work, and get rid of the ones that don’t.

Tax cuts continue to benefit the wealthy the most.

The bill cuts Ohio’s income tax by 1% (reducing the top marginal tax bracket 5.39% down to 5.33% in 2014 instead of 2015). The top 1% will pay an average of $400 less in income taxes – while those in the middle will only save $8 a year. We need the wealthiest Ohioans to pay their fair share – the more we cut the income tax, the father we get from that goal.

Some Good? Maybe. – put it’s really small.  

The bill does provide a larger tax credit for those who make less than $80,000 a year and an expanded Earned Income Tax Credit (EITC). However, the EITC remains non-refundable – excluding those Ohioans most in need. These two changes will put about $2 a month into middle income Ohioans pockets. While signs of a positive step, these changes fall short of helping many Ohioans.

Most importantly – we are not investing in our communities! 

$400 million is a substantial amount of revenue that could be invested into affordable housing, social services, K-12 education, reducing college tuition, or building alternative transportation options. While the bill did invest $36 million into expanding some social service programs – close to $500 million was requested by multiple advocacy organizations asking for resources to meet the current need.

 

Last Minute Tax Cuts Pass

time to investThe Ohio legislature passed HB483 on Wednesday, June 4th, approving $400 million in tax cuts.  The tax cuts  benefit the wealthiest Ohioans the most and drain funds needed to invest in the great public services that strengthen our communities. Dozens of individuals testified throughout the Mid-Biennium Review process on where Ohio needs to invest – adult protective services, addiction treatment, housing, children services, local governments, infrastructure, food security, education, prison security and much more.

A QUICK SUMMARY OF THE TAX CUTS: 

Pass Through Entity Tax Cut: Ohio has no corporate income tax, but some business owners – such as lawyers and accountants in private practice – claim their business income on their personal income tax returns. These individuals are exempt from paying tax on their first 75% of income (up from 50% in HB59).
The Problem: This tax cut is intended to spur job creation – but businesses expand business based on consumer demand, not tax cuts. This will re-direct $290 million into the pockets of mostly wealthy individuals who have no intent to hire new people. 

Income Tax Cut: HB59 (June 2013) included a 10% income tax cut phased in over 3 years – with the final phase in coming in 2015. HB 483 speeds up the tax cut to all go into effect in 2014.
The Problem: The original tax cut was based on a theory that tax cuts lead to jobs – despite research and evidence to the contrary. This will provide nearly $100 million primarily for the wealthiest Ohioans. 

EITC: The bill expands Ohio’s Earned Income Tax Credit from 5% of the federal level to 10% of the federal – a step in the right direction.
The Problem: While this is a step in the right direction, an EITC is most effective when it is refundable. Without refundability of the credit, many will not benefit from this policy. This will provide only $17 million for low and middle income Ohioans. 

Personal Exemption: The personal exemption amounts will be increased for individuals making less than $80,000 a year. This policy will reduce the tax load for middle income Ohioans by about $73 million a year.
The Problem: It is important to make Ohio’s tax system less regressive and credits and exemptions for low and middle income Ohioans is an important step. However, this overall plan will only provide about $36 or $3 a month to middle class families.

Tax cuts just haven’t worked in Ohio – we need to invest in the foundation of a strong economy – great schools, reliable roads and infrastructure, and safe communities.