Firetrucks, productive workers and strong communities

Plain Dealer - April 14, 2013
   

Contrary to what the “drown the government” crowd claims, economies are complicated. It takes good infrastructure, great schools, excellent universities and diverse industries to get highly productive workers and a good quality of life. Often, those things require taxes.

by Amy Hanauer
Published in the Plain Dealer Sunday Forum section

On April 13, 2001, my son’s preschool was closed for Good Friday, and I was very pregnant, not done with my tax return and facing a mountain of work before my baby arrived. After running my son around all morning, I warned him to stay in his room until the big hand was on the three and gratefully sank into my desk chair to dig into my work backlog.

Minutes later, the lights and computer shut off and black smoke began floating up from the basement. Forgetting my huge belly, I scooped up Max, fled out the back door, and yelled for my neighbor to call 9-1-1.

The firefighters arrived in minutes and put out the still-tiny fire, Max was thrilled both by the canceled nap and the red truck, and I suddenly had a more vivid picture of what my un-mailed taxes would pay for.

Twelve years later, I can thank countless teachers, crossing guards, snowplow drivers, police officers, water inspectors and others for helping keep my kids educated, protected, safe and happy in our community. I’ve also watched with gratitude as families with fewer (and more) resources have been protected and enriched in similar ways.

But there is a concerted effort to attack the taxes that pay for services and, as one anti-tax crusader memorably said, make government small enough “to drown it in a bathtub.”

Unfortunately, the approach is succeeding in Ohio, which has, since 2005, slashed its income taxes by 21 percent, eliminated the corporate income tax, trashed the estate tax and ushered in many other tax breaks. Now, although there are differences between what the governor and the Republican House advocate, both proposals include further tax cuts.

Tax slashers often promote these cuts to “help business” or “grow jobs.” Here’s what they actually do: remove resources that people, communities and businesses rely on. That means fewer teachers, food inspectors, environmental and safety enforcers, park rangers and others who make our lives safer and better. It means potholes and bridges don’t get fixed, bike lanes don’t get built, court cases go untried, lines for services lengthen and road kill festers on the street for extra days.

Since that day in 2001, my colleagues and I have been researching tax policy and here’s some of what we’ve learned:

Income tax cuts don’t help the economy. States that cut income taxes in the 1990s saw lower income growth and much lower job growth than states that did not make such changes, on average, according to a study by the Center on Budget and Policy Priorities. Ohio, which cut its income tax in the 2000s, has seen slower job growth and slightly slower income growth than the rest of the nation since.

States with an income tax have fared better than those without an income tax. States that have income taxes, including those with the highest rates for the wealthy, have seen more growth per capita and less decline in median incomes over the past decade than states that do not tax income, according to a study by the Institute on Taxation and Economic Policy.

Tax cuts pushed by the leading national anti-tax organization cause more harm than good. The American Legislative Exchange Council tells states to reduce, eliminate or flatten taxes, which means that poor and middle-income families pay a larger share of their income than wealthier households. States that followed this advice since 2007 created fewer jobs and had slower income growth, lower typical family incomes and higher poverty rates, according to a report from Good Jobs First.

Tax cuts won’t attract people to Ohio. A report I co-wrote for Policy Matters found that people don’t move to a different state to get a lower income tax. Instead they move for jobs, affordable housing and family. Other studies have found the same.

Contrary to what the “drown the government” crowd claims, economies are complicated. It takes good infrastructure, great schools, excellent universities and diverse industries to get highly productive workers and a good quality of life. Often, those things require taxes.

There’s more than one way to build an economy, and I don’t have all the answers. But it’s time to dispense with the fiction that another tax break for the richest, like the one both the governor and the Ohio House have proposed at different levels, will do anything other than hurt our communities.

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