Book Talk - Deceptive and divisive campaign ads have been scary, but author David Callahan believes that Americans have more in common and are far less divided than some politicians would have us believe. Join us for a post-election talk on values we all share, November 13th at Cleveland State University’s Levin College forum on 1717 Euclid, from 4:00 to 6:00 p.m. Callahan’s The Moral Center has gotten rave reviews in the New York and L.A. Times, which said “Read this book for [Callahan's] eye-opening portrait of the way we live now, his sobering analysis of how we got here and his prescient warning of where we may be headed if we don’t get back our bearings.” Professor Cam Stivers, Reverend Mylion Waite, and our own Amy Hanauer will also participate in a discussion, along with you. 

Tax-plan unmasked - Forty-five percent of Ohioans would end up paying higher taxes while only 30 percent would see taxes lowered, based on an updated analysis of the details available on Ohio gubernatorial candidate Ken Blackwell’s plan for a flat 3.25 percent income tax. Meanwhile, the richest Ohioans would each eventually reap thousands of dollars on average in annual tax savings, and the state would lose more than $800 million a year in revenue. State funding would be slashed leading to cuts in programs, increases in local taxes, and other eerie consequences.

Haunted Schoolhouse - Ohio charter schools operated by White Hat Management received $100 million in state funding last fiscal year. Although state law requires companies that operate charters to provide a detailed accounting of spending and services, the full picture remains cloudy one year later.  State rules, as currently enforced, do not demand the full breakout of expenses that the public has a right to see, and other public schools already provide. Our report makes recommendations to ensure that for-profit operators aren’t playing tricks on Ohio taxpayers.

Minimum Wage - There are just days left before you all vote on the referendum to raise Ohio’s minimum wage to $6.85. The proposal would give raises to 719,000 low-paid Ohio workers, states with higher minimums have had more job growth, and attempts to scare supporters are all smoke and mirrors.

No treats for jobless Ohioans - Ohio employment continues to trend downward, according to September numbers from the Ohio Department of Jobs and Family Services. The number of Ohio jobs dropped by 10,000 since the recent peak in May. Ohio employment remains a frightening 137,000 jobs, or 2.5 percent, below the job base of March 2001, when the last recession officially started. Ohio is one of just eight states that have lost jobs since the recession began.

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Halloween Quiz -
1. About what do more than 650 economists agree? Click here to find out.
2. How many Ohio workers are certified as having lost their jobs due to our monstrous trade deficit? Check your next e-news to find out…..
3. How could Ohio gain jobs, reduce foreign oil use, and clean up our environment? Click here.

That’s all!
The Policy Matters Ohio Team 

Ohio policy news is as variable as this week’s weather is predicted to be – sunny potential in energy, better economic policy, free tax preparation and a minimum wage boost; stormy progress on tax proposals and job growth.

Tax proposal falls flat - Forty-five percent of Ohioans would end up paying higher taxes while only 30 percent would see taxes lowered, based on an updated analysis of the details available on Ohio gubernatorial candidate Ken Blackwell’s plan for a flat 3.25 percent income tax. Meanwhile, the richest Ohioans would each eventually reap thousands of dollars on average in annual tax savings, and the state would lose more than $800 million a year in revenue. Thanks to the Institute on Taxation and Economic Policy, we were able to analyze the evolving proposal, as new details emerged. All iterations of the policy turned out to be flat-out misguided.

Growth for all - Ohio worker productivity, Ohio executive compensation and national corporate profits have all risen steeply in inflation-adjusted terms in the past few years, while the minimum wage has declined in real terms, the median wage has stagnated, and the average wage has grown at a snail’s pace. These are the findings of a new report by Policy Matters Ohio and the Center for American Progress (CAP). Room to Grow: Ohio Can Afford a Higher Minimum Wage finds that increased productivity and profits provide room for a minimum wage increase in Ohio. 

No poaching here - As Cleveland considered working with nearby suburbs to prevent destructive inter-city competition for jobs, Policy Liaison Wendy Patton decided to gather intelligence on how to help communities avoid poaching and counter-poaching among neighbors. Though they are uncommon, we found several, described in this September 2006 background memo.

Who Takes Credit? - More Cuyahoga County families received free tax preparation at volunteer income tax assistance sites in 2006 than in any previous year. The Cuyahoga EITC Coalition helped working families claim more than $4.2 million in federal credits and avoid exploitative tax preparation and early refund fees. We also surveyed these modest-income families and found – surprise! – they plan to spend much of the money in the community. See the report here. This and other good work inspired the National Community Tax Coalition (LINK) to appoint Policy Matters’ research assistant David Rothstein to its Steering Committee.

Clean EDGE - Our friends at the Economic Policy Institute and the Apollo Alliance looked at where jobs would be generated if the federal Clean Energy Development for a Growing Economy (Clean EDGE) Act were passed. The EPI/Apollo study finds that the Clean EDGE Act would spur $49 billion in renewable energy investment and create 530,000 U.S. jobs by 2009. Ohio, with our existing industrial infrastructure, would be a big winner, standing to gain almost 26,000 jobs.

But we haven’t gained ‘em yet - Employment in Ohio snuck downward slightly since its recent peak in May, declining by 7,000 after last spring’s increase. Since June of 2005, when an overhaul of state taxes was signed into law with the intent of creating jobs, employment in Ohio grew by just 31,900 jobs, a rate of 0.6 percent. During the same period, the nation added 2.1 million jobs, for a growth rate of 1.6 percent. Read our JobWatch report here.

That’s all!
The Policy Matters Ohio Team 

Ohio Employment Continues Downward Trend

Employment in Ohio continues to trend slightly downward, according to seasonally adjusted payroll numbers for nonfarm wage and salary jobs released Oct. 24 by the Ohio Department of Jobs and Family Services (ODJFS). The number of jobs in Ohio has declined by 10,000 since its recent peak in May.

Full Report

Ohio charter schools operated by White Hat Management received $100 million in state funding last fiscal year. Although more information is becoming available on the use of these funds, the full picture remains opaque a year after the Ohio General Assembly required companies that operate charter schools to provide a detailed accounting including the nature and costs of the services they provide at each school. Specifically:

• White Hat has not reported how much it spends instructing its 14,729 students, compared to administration, building operations or other kinds of expenses. This information is easily available for other public schools.
• The company does not disclose how much it spends buying textbooks.
• A substantial share of White Hat’s expenses at the schools it operates – nearly half at its Life Skills schools – goes toward overhead or purchased services. Thus, we still don’t know clearly how this money is being spent, and it is impossible to get an exact reading of how much the company is making in profits.

This October 2006 report examines information provided by the White Hat schools as part of the Auditor of State’s annual audits for the 2004-2005 school year as well as five-year financial forecasts made last fall to the Ohio Department of Education. It finds that today’s rules, as currently enforced, do not require the full breakout of expenses that the public has a right to demand, and other public schools already provide. The report also makes recommendations on how to tighten the rules and create more accountability.

Press Release

Executive Summary

Full Report

Ballot amendment would raise low pay
By Jon Newberry

Cincinnati Enquirer

A proposed Ohio constitutional amendment to hike the state’s minimum wage from $5.15 an hour to $6.85 has supporters and opponents battling over privacy issues as well as money.

Many opponents contend the measure will hurt working people more than it will help them – and say a bigger issue is the threat they claim it poses to privacy.

In addition to increasing the minimum wage for roughly 5 percent of the state’s 5.6 million workers, the proposal contains other provisions that require employers to:

Maintain complete pay records for all employees from date of employment through at least three years after they leave.

Provide free copies of those records to any employee or “person acting on behalf of an employee.”

Jim Mundt, regional director of White Castle operations in Greater Cincinnati, said the proposal doesn’t set any limits on the number of times someone could request pay records and that the recordkeeping requirements would apply to all employees, not just hourly employees.

“We see this as a way for union organizers to get a lot of information that they don’t have access to now,” he said, calling it “an invasion of privacy bill masquerading as a minimum wage bill.”

Supporters call those claims overblown. They focus on the economic benefit that they say poor working people would get from a higher wage.

“It’s a start. It’ll bring them up some,” said Doug Sizemore, a member of the Machinists Union and the executive board of the Cincinnati AFL-CIO. “It’s the right thing to do.”

He thinks the constitutional amendment is needed in Ohio because the federal government and the state legislature haven’t done enough to help working people. The federal minimum wage of $5.15 hasn’t been increased in nine years, Sizemore notes.

The amendment also would require the minimum wage to be automatically adjusted every year, based on changes in the cost of living beginning in 2008.

Columbus-based Ohioans for a Fair Minimum Wage, which supports the amendment, counters the privacy charges by saying similar provisions in nine other states have not led to invasions of privacy.

The amendment only gives someone a right to inspect his or her own payroll records – and anyone else who wanted access would have to have that employee’s consent, it said.

The group also said the proposal doesn’t impose any new requirements on employers, who already must maintain similar records under federal law.

320,000 AFFECTED

Privacy issues aside, the impact of the proposed wage hike is also a matter of disagreement, although both sides more or less agree on the number of people who would be directly affected by the measure because they now make less than $6.85 an hour.

A study by Florida State University economist David Macpherson concluded that the hike would directly affect about 320,000
employees, 63 percent of whom are aged 24 or younger. His study was conducted for the Employment Policies Institute, which opposes the measure.

The AFL-CIO, which supports the proposal, says 297,000 Ohio workers would be directly affected.

Amy Hanauer, executive director of Cleveland-based think tank Policy Matters Ohio, noted that more than 400,000 additional Ohio workers would indirectly benefit because they now make somewhat more than $6.85 and will likely get raises if the minimum-wage hike passes.

More than half of all affected workers live in the poorest 40 percent of households, she said. “It’s a relatively well-targeted way of dealing with low incomes,” she said.

She and other proponents also say states with higher minimum wages create more small businesses and small-business jobs.

BUSINESS EXPENSES

Meanwhile, many business people – but not all – oppose the measure because say it would drive up their costs.

Frisch’s Restaurants Inc. has made a rough calculation that its overall pretax expenses in Ohio would increase by $3 million a year if the minimum wage amendment passes, said Don Walker, the company’s chief financial officer.

“The only thing that you could do, if that goes through, I’m sure everybody would raise their prices,” he said.

And it could lead to fewer jobs, he said. “We would have to look at, what does this do to our economic model … if you can’t recoup it with a price increase.”

Walker pointed out that the minimum wage for servers, who wait on tables and rely on tips for most of their pay, is now $2.13 an hour. Under the proposed amendment, it would increase to half of the new minimum, or $3.43. Since Frisch’s typically pays the minimum wage for servers, that’s a direct increase in its expenses of $1.30 for every hour worked, plus higher company expenses for Social Security and Medicare.

Lorrie Paul Crum, vice president of corporate communications at Sandusky-based Cedar Fair LP, which bought Kings Island earlier this year, said a minimum wage hike would increase its costs but wouldn’t result in job cuts.

“Our priority is going to remain the same,” she said, citing safety and customers’ enjoyment of its parks as its top concerns.

“Is it going to devastate us? Absolutely not. Is it going to cost us more? Yes, absolutely it will.”

WHO BEARS THE COST?

Steve Cobb, an economist at Xavier University, said the effect of a higher minimum wage could be fewer jobs, increased prices or lower profits, depending on the circumstances of individual businesses and how much the added wage expense raises their total expenses.

If it’s a small fraction of overall expenses, a company might be able to absorb the added cost.

But if a company employs a lot of unskilled labor – as is common for retailers and fast-food chains – it would have to react in some way.

“That ultimately determines who bears the cost,” Cobb said.

How a company reacts also depends on its competitive situation, including alternative options for customers.

Some companies in Southwest Ohio, for example, might have trouble raising prices if customers can instead go to Northern Kentucky or Southeast Indiana, where the minimum wage would remain $5.15. In that situation, companies would probably have to either reduce jobs, accept lower margins, or fold, Cobb said.

A STARTING POINT

At White Castle, where the base starting pay is $6.75 and the average wage is $10 plus more than $4.50 in benefits, Mundt sees the issue differently.

“Everybody feels good about raising the minimum wage,” he said. “But it’s a starting point … for people with little or no skills and no record of reliability.”

White Castle hasn’t been able to hire qualified workers at minimum wage for at least 30 years, he said.

When the minimum wage goes up, everyone else expects a raise too, he said. The end result is higher prices.

Or fewer jobs.

“That’s the first thing you’d try to (cut), in order to hold prices down,” he said.

Dayton Daily News

By William Hershey

Columbus — Torrie Gregg of Dayton View, a single mother who’s raising five children and working for $6.25 an hour at McDonald’s, plans to vote for Issue 2 on Nov. 7, a constitutional amendment to raise the minimum wage from $5.15 to $6.85 an hour.

Steve Bowser, president of Bowser-Morner Inc., engineering and testing firm in Huber Heights, plans to vote “no,” mainly because he thinks provisions in the amendment would invade his employees’ privacy and make it hard to recruit high-quality talent.

With less than a month until the election, supporters, led by organized labor and faith groups, are casting the campaign as a battle for economic fairness and justice.

Opponents, mainly business groups, are trying to shift the focus from dollars and cents to parts of the amendment that require employers to keep and, upon request, release an employee’s payroll records with information such as addresses and pay rates.

For Gregg, it’s about money.

Late in the evening while her children — the eldest 8 and the baby is 2 — sleep, she begins her weekly workout, trying to stretch her pay and juggle bills.

“I’m always behind in something. Before I even get my paycheck, the money is always gone,” said Gregg, 24, a member of ACORN, a group backing the proposal. “It’s crazy and it’s hard.”

She said she whittles bills a little at a time, often not able to pay the whole bill at once. “I always try to pay them something. It’s a struggle and it’s a headache, when you get a disconnect in the mail,” she said.

She’d welcome a 60-cent per hour raise if voters approve the amendment.

“Any little bit is better than nothing,” she said.

A study this year by Policy Matters Ohio, a liberal-leaning research group in Cleveland, concluded that an estimated 719,000 Ohio workers would benefit from the amendment. That includes 297,000 who now make less than $6.85 an hour and an additional 423,000 workers earning at least $6.85 an hour, but who would likely get modest raises as employers adjust pay scales to accommodate the new minimum.

However, a separate review of the proposal by Matthew Carr of the Buckeye Institute for Public Policy Solutions in Columbus, a conservative-leaning research group, concluded that raising the minimum wage would slow job growth and that the poor would be harmed the most.

“When the price of something increases, people demand less of it,” Carr wrote. “As the cost of employing low-wage workers increases, employers will hire fewer of them.”

Meanwhile, Bowser does not like the part of the amendment that provides annual increases in the minimum wage, pegged to the Consumer Price Index.

“I have a lot of concerns about putting this into the state constitution and locking in inflation adjustments every year. I have no idea what the long-term consequences of that are,” said Bowser, 54, whose firm has 150 employees, 115 in Dayton and 35 in Toledo.

His biggest concern, however, is the requirement that his company would have to make available to an employee or someone “acting on behalf of an employee” payroll records with personal information.

State Issue 2:

Ohio Fair Minimum Wage Amendment

What: A constitutional amendment on the Nov. 7 ballot to raise Ohio’s minimum wage from $5.15 to $6.85 an hour on Jan. 1, 2007

Secretary of State: sos.state.oh.us, click on Election Day, Nov. 7, 2006; information includes the ballot language, arguments for the issue and arguments against.

Supporters include: Dayton City Commission, Ohio Council of Churches, Let Justice Roll, NAACP Ohio, We Believe Ohio, Association of Community Organizations for Reform Now, Ohio AFL-CIO and Ohio Democratic Party.

Opponents include: Dayton Area Chamber of Commerce, Englewood-Northmont Chamber of Commerce, National Federation of Independent Business-Ohio, Ohio Council of Retail Merchants, Ohio Grocers Association, Ohio Hospital Association, Ohio Manufacturers’ Association, Ohio Restaurant Association and Ohio Society of CPAs.

Flat Fall
The Akron Beacon Journal 

Of the many easy answers pitched by Ken Blackwell, none delights him more than his proposed flat tax, a single rate of 3.25 percent on the income of Ohioans. The Republican candidate for governor championed the concept last week in a third televised debate with Ted Strickland, his Democratic opponent. In many ways, the flat tax serves as the centerpiece of what Blackwell calls his bold agenda for rocketing Ohio out of its economic doldrums.

Interestingly, in a “debate fact check” issued after the session with Strickland, the Blackwell team noted that Illinois, Indiana, Michigan and Pennsylvania all have single rate income tax systems. The suggestion was: Ohio should follow. Yet these four states have hardly been stellar producers of economic growth. Each falls below the national average in job creation.

The majority of states with income taxes have opted for a graduated system of rates, just like Ohio in the 1970s. They prefer the element of fairness, those households benefiting more handsomely from the many opportunities the country offers paying a larger share of their income in taxes. In Ohio, the wealthiest taxpayers face a top rate of 7.1 percent, now slated to drop to 5.9 percent in 2009.

The flat tax has the appeal of simplicity. Yet a close look at the Blackwell plan reveals complications enough. The candidate clearly understands that going immediately to a single rate of 3.25 percent would result in higher taxes for many Ohioans, especially those households with annual incomes between $30,000 and $70,000, the average increase ranging from $139 to $187. Thus, he proposes a transition period during which all Ohioans facing higher taxes would enjoy a rate freeze, permitting Blackwell to proclaim no Ohioan would encounter a tax increase — for the moment.

Policy Matters Ohio, a Cleveland think tank, has crunched the numbers with the Institute on Taxation and Economic Policy of Washington, D.C., and discovered that the wealthiest 1 percent of Ohioans (those households with annual incomes above $295,000) would save an average $13,805 a year. The analysis digs deeper to find that a single mother earning $57,000 a year with two children would pay slightly more in taxes. A single man earning $762,000 with no children? Try a tax cut of $17,588.

An added concern is, as wealthier households feel such relief, the state as a whole would bleed revenue by roughly $850 million a year. That’s a substantial sum for a state in which school districts are slashing teaching jobs and universities are ever increasing tuition, placing an unacceptable burden on working families seeking to give their children opportunities.

All of it suggests the Blackwellian quality of this flat tax. It sounds so good — until you plunge into the detail, into the complications and potential harm.

Middle-Class Ohioans Would Pay More Under Flat-Tax Proposal

Forty-five percent of Ohioans would end up paying higher taxes while only 30 percent would see taxes lowered, based on an analysis of the details available on gubernatorial candidate Ken Blackwell’s plan for a flat 3.25 percent income tax. Meanwhile, the richest Ohioans would reap thousands of dollars on average in annual tax savings apiece when the plan is fully implemented, and the state would lose more than $800 million a year in revenue. Those were among the findings of an analysis by the Institute on Taxation and Economic Policy (ITEP), a research group in Washington, D.C., with a sophisticated model of the state and national tax systems. Policy Matters Ohio released the report, updating an earlier one. It analyzes a flat tax that would allow those making $20,000 or less a year after exemptions to pay no state income tax.

Full Report

Policy Matters Ohio previously released an analysis of a flat-tax plan that would have exempted fewer taxpayers.

The Akron Beacon Journal

By Julie Carr Smyth

CINCINNATI – Candidates for Ohio governor differ in their approaches to solving the state’s economic problems, but they also differed Wednesday on several of the facts involved.

Republican nominee Ken Blackwell often repeated a claim during the third debate between him and Democrat Ted Strickland that Strickland’s plans will take a generation to take effect, a lag Blackwell says Ohio can’t afford.

His campaign says the premise for the claim is that Strickland proposes waiting and watching how Ohio’s new tax reforms play out, investing in college accounts – the first of which won’t come due for 18 years – and heavily pushing resources into early childhood education rather than immediate job creation programs.

The Strickland camp defends its Turnaround Ohio plan as having both short- and long-term aspects. Spokesman Keith Dailey said many of Strickland’s proposals would immediately affect families, such as expanded health screenings and preschool access and expanded work force development opportunities. Strickland, a congressman, also supports the minimum wage increase on November’s ballot as a positive for 700,000 Ohioans.

Strickland’s claim during the debate that Blackwell’s flat-tax proposal would raise taxes for 60 percent of Ohioans is also a point of contention. The plan would take the income tax rate for all Ohioans to 3.25 percent over several years.

Strickland’s figure came from Cleveland-based Policy Matters Ohio, which recently reported that 61 percent of Ohio taxpayers would pay more in state income taxes if Blackwell’s proposal were enacted, while only 16 percent would pay less.

Blackwell spokesman Carlo LoParo said the analysis doesn’t take into account the effects of tax exemptions, which the Blackwell plan would retain, on actual tax payments. He said Ohioans making under $20,000 pay no income tax under the plan. Under recently enacted tax changes, Ohioans making under $10,000 already pay no income taxes.

Blackwell, the secretary of state, called Strickland a tax-and-spender with 83 votes for taxes or against tax relief in Congress. Blackwell’s campaign said Strickland had repeatedly opposed tax cuts, tax reductions and tax breaks.

Strickland also has voted for some tax reductions and tax credits. And some of the votes cited by Blackwell are such stands as Strickland’s vote against President Bush’s tax cut package, which many Democrats opposed because they said the package helped the wealthy with little relief for middle-income taxpayers. Another Strickland vote was to balance the federal budget.

Blackwell has focused on Strickland’s absence rate and his lack of success in passing bills, something not uncommon among minority party members. He also points to the high poverty rate in Strickland’s rural, southeastern Ohio district.

“What makes us think that a man who can’t turn around his district can turn around Ohio?” Blackwell asked.

Strickland said he played a role in saving jobs at Wheeling-Pittsburgh Steel, helped preserve jobs and health benefits at the uranium enrichment plant in Piketon and helped laid-off coal miners get government resources for retraining.

—

Associated Press Writer Dan Sewell contributed to this report.

GOP candidate’s plan, including flat tax, dismissed by Strickland, other critics
By Mark Niquette

Columbus Dispatch

Income-tax cuts approved last year would be phased in more quickly and Ohioans earning $20,000 or less a year would no longer pay income tax under a plan announced yesterday by Republican gubernatorial candidate J. Kenneth Blackwell.

Blackwell said his plan, which includes moving toward a flat tax, would immediately remove nearly 900,000 individual filers from the tax rolls and eventually mean $1.2 billion a year in income-tax cuts for individuals and companies.

With the candidates for governor poised to debate on the economy tonight in Cincinnati, Blackwell argued that his plan would help stimulate the state’s moribund economy by encouraging business growth and job creation.

But Democrat Ted Strickland and other critics say it would benefit primarily the wealthy and rob the state treasury of funds for needed services.

Blackwell said that during his first 100 days in office, he would push to phase in over three years the 21 percent income-tax cut the legislature had spread out over five years.

The legislature also approved giving credits to those earning $10,000 or less a year so they don’t pay income tax. Blackwell would double that threshold.

Based on 2004 returns filed last year, Blackwell’s change would remove an additional 879,703 filers who paid $113.7 million in taxes, state tax data show.

Ohio uses a graduated income-tax system with nine tax brackets of increasing rates, based on income. That system produced $8.8 billion in 2004.

Blackwell wants to remove four tax brackets as a step toward enacting a single-rate tax system in several years, with a target rate of 3.25 percent.

To address concerns about the tax burden shifting to the middle class as a result, Blackwell said Ohioans currently paying less than 3.25 percent would receive an income-tax rate freeze and keep their current deductions.

He also said that about 300,000 small-business owners pay the state’s income tax instead of business taxes, so the tax cuts would help them, too.

“Our high taxes chase away good-paying jobs and opportunities,” Blackwell said in a news release.

Strickland said Blackwell’s plan is a gimmick.

Keith Dailey, campaign spokesman for Strickland, said, “Mr. Blackwell’s plan lacks one key ingredient: credibility. This proposal just doesn’t add up.”

Blackwell argues that the lost revenue from the tax cuts he proposes would be offset by the 3.5 percent cap on the annual increase in state government spending enacted by the legislature this year and by savings from reforming the state’s Medicaid program. Strickland isn’t buying that, either.

“Mr. Blackwell talks about using Medicaid savings that he’s already spent in his education plan,” Dailey said. “It’s laughable that he suggests using a spending cap that limits spending but does not produce savings.”

Blackwell also argues that lowering taxes will stimulate business activity that, in turn, will produce more tax revenue. But critics such as Zach Schiller, of Policy Matters Ohio, say that’s a flawed analysis and that Blackwell’s proposal raises many unanswered questions.

Dispatch Senior Editor Joe Hallett contributed to this story.