What helps, what doesn’t
- April 11, 2013
In this edition of our eNews — A tax break for business income won’t help Ohio but a sales-tax credit would. We have also mapped the benefits of the EITC, and took a look at big changes implemented by a local workforce training agency that have made it more effective.
Business break – The House has taken a hatchet to Gov. Kasich’s tax proposals, cutting both good and bad elements of his plan. Among the positive changes is the elimination of his proposed business-profit exclusion – our analysis shows that this kind of tax break won’t help Ohio’s economy. Most qualifying taxpayers don’t employ anyone besides themselves, and are unlikely to hire new workers because they get a tax cut; most who own businesses and have employees will get too little in tax savings to add workers. We’ll be watching to see if this bad idea gets new traction down the road.
Sales-tax credit – Unfortunately, the House also removed from the budget Kasich’s proposal to broaden the sales tax, which got a qualified thumbs-up from us because Ohio’s economy is more service-oriented than it used to be. Our caveat: lower-income Ohioans need to be protected from a broader sales tax, with a state Earned Income Tax Credit (see below), and a sales-tax credit, which would provide a set amount for each member of a family to offset some of the cost of a sales tax. These credits, important even if Kasich’s proposal stays in the dustbin, would help make Ohio’s tax system less regressive.
Mapping the EITC – The federal Earned Income Tax Credit does more than any other program to keep working families out of poverty. We have recommended a state credit pegged at 20 percent of the federal EITC. Our new interactive map shows that the federal EITC brings hundreds of millions of dollars to Ohio each year, benefiting families and communities in every county. The map also shows the benefits of a state EITC: In 86 counties, at least 10 percent of households would claim a state credit. At 20 percent, a credit would provide the average recipient with about $420.
Demand-driven – By taking a new approach to its work in 2010, Employment Connection, the workforce-training agency for Cleveland and Cuyahoga County, has greatly improved the services it provides to local firms and workers. Our study on the agency shows that EC’s employer-driven, demand-focused model is making a difference, and that to be most effective, workforce training must be closely tailored to the needs of the agency’s clients, local employers, and the regional economy.