Friday, May 12, 2006
Ohio's State and Local Tax Burden
A number of groups and public officials commonly and incorrectly suggest that Ohio’s state and local tax burden is 3rd highest in the country. The claim is based on misleading data published by the Washington DC-based Tax Foundation. Few people that examine state and local public finance use those rankings because of methodological deficiencies.
Instead, most people interested in state and local tax burden’s turn to data complied and published by the census bureau and bureau of economic analysis. For instance, the respected analysts at the Ohio Department of Taxation’s Tax Analysis Division recently updated their “Brief Summary” of Ohio taxes. Included in publication are the most recent rankings for Ohio.
According to these commonly accepted data Ohio ranked 19th when controlling for state population, and 13th when controlling for personal income.
It’s important to note that state and local tax burdens are converging. There is less of a difference between the highest tax state compared to the lowest tax state. Also, stronger state economies are associated with HIGHER levels of taxation. These data are contained in testimony on the recently passed tax reform package. The point is that those that argue Ohio’s tax system is deleterious to the state’s economy are not only wrong, but they don’t understand the mechanics of the modern economy. This is not to suggest that increasing the marginal tax rate to 100% is a good idea. But, neither is gutting the capacity of the public sector to support our economy would be nearly as bad.
The public sector provides substantial support for our education and workforce systems. Ohio’s success in the global economy depends on the effectiveness of our workforce. If you rip apart the public sector, you undermine our ability to compete.
Instead, most people interested in state and local tax burden’s turn to data complied and published by the census bureau and bureau of economic analysis. For instance, the respected analysts at the Ohio Department of Taxation’s Tax Analysis Division recently updated their “Brief Summary” of Ohio taxes. Included in publication are the most recent rankings for Ohio.
According to these commonly accepted data Ohio ranked 19th when controlling for state population, and 13th when controlling for personal income.
It’s important to note that state and local tax burdens are converging. There is less of a difference between the highest tax state compared to the lowest tax state. Also, stronger state economies are associated with HIGHER levels of taxation. These data are contained in testimony on the recently passed tax reform package. The point is that those that argue Ohio’s tax system is deleterious to the state’s economy are not only wrong, but they don’t understand the mechanics of the modern economy. This is not to suggest that increasing the marginal tax rate to 100% is a good idea. But, neither is gutting the capacity of the public sector to support our economy would be nearly as bad.
The public sector provides substantial support for our education and workforce systems. Ohio’s success in the global economy depends on the effectiveness of our workforce. If you rip apart the public sector, you undermine our ability to compete.
