The centerpiece of Ken Blackwell’s proposed tax reform doesn’t translate into relief for those Ohio households with middle incomes

Akron Beacon Journal - October 8, 2006

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.

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