How Will Ohio Know Whether Tax Plan Works?

Dayton Daily News - June 9, 2005


Dayton Daily News

Gov. Bob Taft’s tax plan is frequently described with a single word: complex. The term aptly applies to the plan’s details, but keeping track of the bigger picture isn’t so confusing.

Gov. Taft appears to have won approval of most of the changes he’s proposed, the centerpiece of which is replacing Ohio’s existing business taxes with a “commercial activity tax.”

That fact is important because it means the new system can fairly be judged against the claims of those who brought it forward. They insist, for example, that it’s more equitable than the old, that it will help Ohio better compete for jobs in the world economy, and that it will provide a reliable source of taxes.

But proponents also have had to admit that, at least during the next several years, the plan will come at a considerable cost. When combined with personal income tax cuts for individuals, the overhauled system won’t raise as much revenue as the existing one would have, at least in the foreseeable future. The gap is estimated to be $600 million a year or more.

Less money, of course, requires less spending and here is where citizens need to monitor the tax plan’s costs. Many people are predicting that there will be more local levy requests for police and fire service, for example. Hospitals are worried that as health benefits are reduced for the poor, they’ll see more needy people in their emergency rooms and that they’ll have to eat those costs. Meanwhile, the state’s universities are raising tuition as often and as much as the politicians will let them.

The new tax system is supposed to be an investment in Ohio’s future, one that helps revitalize the economy so that, in the longer run, Ohio can put money in local communities, education and health care. But the approach is very much an experiment; no one is really sure if the changes really will attract the investment Ohio hasn’t been able to capture.

A major economic turnaround can’t be expected to occur overnight. But some indicators can show if things are moving in the right direction. Tax data, for instance, can demonstrate whether tax burdens are being equitably shared, as promised, or if the changes have hit individuals or certain business sectors harder than even the current system does. (Though Ohio’s business tax code does disadvantage some industries, a 50-state survey performed by Ernst & Young puts Ohio in the middle of the pack when it comes to the overall tax burden businesses pay in state and local taxes.)

Lt. Gov. Bruce Johnson, who’s credited as the plan’s architect, says broad indicators over time are the best measurements. The ultimate goal, he says, is to raise Ohio’s per capita income, gross state product, fixed investment and population growth.

Zach Schiller of Policy Matters Ohio, a left-leaning think tank and critic of the plan, proposes a more immediate measurement. He suggests taking a list of the plan’s business proponents and keeping track of the jobs they add in Ohio in the near term.

If the old tax code was holding Ohio’s business back from investing here, now that that’s being fixed, the state should expect results. More, good paying jobs are what people are looking for.

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