REMI Study Comments

Gongwer News Service - May 9, 2005

Gongwer News Service

REMI Study Comments: Mr. Taft’s administration has pushed the CAT and other aspects of the proposal as a long-overdue upgrade of a tax system that overly burdens business investments and has proven to be anticompetitive for some time. To bolster the argument, the administration released a study late last month by the Regional Economic Models, Inc., that lays out the potential economic impacts of the proposal based on a “dynamic”
review that considers numerous factors.

REMI, a widely recognized research outfit based in based in Amherst, Mass., found that the tax package would generate an additional 43,250 jobs and $2.5 billion in gross state product by 2010. (See Gongwer Ohio Report, April 28, 2005)

The Policy Matters review of the report, crafted by researchers Jon Honeck and Zach Schiller, questioned why the Taft administration would spend $154,000 on a tax study “when the result is so incomplete and misleading.”

Noting that REMI has been used by other entities to look at the effects of government spending cuts, Messrs. Honeck and Schiller also stated that the modeling group omitted proposed changes to the kilowatt-hour tax, the imposition of a real-estate transfer tax and sponge portion of the estate tax, and the elimination of the 10% rollback on commercial
property taxes.

Among the biggest problems with the REMI study, according to Policy Matters researchers, is its failure to consider the statewide impacts of some $2.8 billion in lower state revenue by 2010. While the REMI report repeatedly notes that charts and numbers in the review don’t incorporate “offsetting taxes or government spending changes” that might occur due to the state revenue decline, “this does not make the REMI estimates meaningful for Ohio citizens and legislators,” Policy Matters said.

DOD’s Mr. Teets said the administration appears to have a different philosophical take on the matter. “They seem to make a claim that money is better spent by government than by the private sector. That just isn’t a philosophy we subscribe to,” he said.

“We think the private sector is rightfully where job creation still exists. The private sector should set the standard for economic growth, not government,” Mr. Teets said. “We’ve said all along that tax reform only works if you have budget restraint that goes with it.”

Policy Matters also found that, “Even aside from the major omission in the REMI study, the results show relatively small effects on the Ohio economy even when the tax is fully phased in five years from now.”

The estimated job growth resulting from the plan is 0.8% of the total employment in Ohio and under one-fifth of the jobs the state has lost in the last five years, according to the researchers. The projected GSP increase reflects a 0.7% rise adjusted for inflation.

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