These are just a few of the phrases used by State Tax Commissioner William Wilkins, Lieutenant Governor Bruce Johnson, and former State Tax Commission Tom Zaino in a Plain Dealer story on the latest nonsense to emanate from the Tax Foundation – they are claming that Ohio is 2nd worst in the nation in terms of business tax climate. Even the Ohio Business Roundtable blasted the Tax Foundation report in a memo they sent to Governor Bob Taft and legislative and business leaders. It’s amazing to me that anyone still pays attention to anything that Tax Foundation says when so many analysts have shot so many holes in their methodology, but I guess it all comes down to marketing.

Grover Norquist (he’s head of Americans for Tax Reform and was a paid hack for convicted lobbyist Jack Abramoff) put out a list yesterday heralding 9 candidates for the Ohio legislature who have signed the following pledge, “to oppose and vote against any and all efforts to increase taxes.”

This pledge has always seemed to me to be one of the most foolish things a candidate could sign, and in fact a majority of previous signers have actually found themselves in positions where they have voted to raise taxes even after having signed the pledge. In fact of the 20 incumbent legislators who are listed as incumbent pledge signers, an amazing 75 percent of them have actually voted to increase taxes.

So here are the names of the new candidates for the Ohio General Assembly who have signed the Americans for Tax Reform pledge, we will have to wait and see if they get elected and then whether they are able to stick with their pledge:

John Adams (Republican candidate for House District 78)
William Batchelder (Republican candidate for House District 69)
Dan Dodd (Democratic candidate for House District 91)
David Fago (Republican candidate for House District 15)
Jimmie Hicks (Republican candidate for House District 9)
Matt Huffman (Republican candidate for House District 4)
Tim Knauff (Republican candidate for House District 89)
William McGivern (Republican candidate for House District 14)
William Pikor (Republican candidate for House District 99)

As a final note, the Ohio Revised Code Section 3599.10 says: "No person, firm, or corporation shall demand of any candidate for the general assembly any pledge concerning his vote on any legislation, question, or proposition that may come before the general assembly; provided that this shall not be understood to prohibit a reasonable inquiry as to such candidate's views on such question or legislation. Whoever violates this section is guilty of a corrupt practice and shall be fined not less than five hundred nor more than one thousand dollars."

Ok, I couldn’t resist that headline, but I am very excited by the Cuyahoga County Commissioners announcement that they are committed to implementing a universal preschool program for Cuyahoga County 3 and 4 year olds over the next several years. Ohio’s next Governor should take note of this important move and incorporate it in the next state budget. It’s easy these days to be seduced by the all the bad news about our economy and increasing poverty, and to spend all of our time wringing our hands about it. Universal preschool can give all Ohio children a fair start and over time it will pay social and economic dividends that can help turn this state around.

To learn more about how public and private investments in early care and education can help turn Ohio around, visit Ohio Grounwork

Citizens Against Government Waste (CAGW) is back in the news, and the news isn't good. CAGW is the group that our own Ohio based Buckeye Institute worked with to produce a report documenting wasteful state spending.

A new report entitled Investigation of Jack Abramoff's Use of Tax-Exempt Organizations was just released by the Minority Staff of the U.S. Senate Finance Committee. The report was authorized by Republican committee chairman Senator Chuck Grassley (R-Iowa). The report documents how disgraced Washington lobbyist Jack Abramoff used non-profit, tax exempt groups like CAGW to advance the interests of his corporate clients. The report documents how one Abramoff client, Magazine Publishers of America, contributed money to CAGW, and then CAGW published commentaries that were supportive of the magazine publisher's policy objectives.

Revelations like this one, and others, certainly call into question the integrity of CAGW and raise questions about any "research" or "reports" that they are connected with.

Independent Sector issued a statement in response to the report saying that "this kind of activity is inconsistent with accepted standards of practice by charitable organizations. The alleged abuse has the potential to undermine the public trust in charitable organizations as they work to improve lives and communities. "

George Bernard Shaw, the famed Irish playwright, once said if all economists were laid end to end, they would not reach a conclusion. Well yesterday the Economic Policy Institute released a statement endorsed by over 650 economists (in this case they did raise a conclusion), including 5 Nobel laureates and 6 former American Economics Association presidents, the statement asserts that a modest raise (from $1.00 to $2.50 per hour) in the minimum wage at both the state and federal level, with future increases indexed to protect the workers' purchasing power, "can significantly improve the lives of low-income workers and their families, without the adverse effects that critics have claimed."

Ohio voters will get a chance to reach their own conclusion and to raise the state minimum wage from $5.15 to $6.85 an hour on November 7 when they consider State Issue 2. You can learn more about the campaign to raise the minimum wage here.

I spent much of 2005 and 2006 helping to organize opposition to the Tax and Expenditure Limitation (TEL) amendment proposals because I believed it represented such a significant threat to Ohio’s economy and our education and health care systems. Earlier this year the Ohio General Assembly adopted, and Governor Taft signed, Ohio Substitute Senate Bill 321, which created a state appropriation limitation (SAL) for state general revenue fund (GRF) budgets beginning in state fiscal year 2008. I have finally written a brief analysis of the legislation and you can find it on the Community Solutions website.

Here are a summary of the basic findings:

It’s difficult to predict the long-term impact of the SAL because it can be changed by a simple majority vote and because the Ohio Legislative Services Commission has described the amendment as not enforceable.

The SAL covers only a fraction of the public spending that would have been covered by the TEL amendment.

Under the SAL, GRF spending increases will be limited to approximately $1.2 billion for state fiscal years 2008-2009.

Education makes up the largest share of GRF spending in the state – approximately 48%.

The SAL gives the Governor new power and will result in some changes in the state budget process.

Even if the SAL remains in place, public spending proponents can easily circumvent it, as demonstrated by Secretary of State Ken Blackwell’s proposal to create and spend a multi-billion dollar JOBS fund completely outside of the GRF and therefore not limited by SAL spending limitations.

The original TEL amendment would have been a disaster for the State of Ohio. It was an economy killer, it would have devastated our education system from pre-school to higher education and it would have shut down much of our healthcare system in the state. While the SAL was much preferable to a TEL amendment I remain opposed, because at its core it retains a flawed formula and there is no guarantee that the formula will ever be changed or corrected. I remain concerned that the amendment will result in reductions in education, health care and other social services and that the burden for paying for these services will be shifted to the local governments with the result being increased property and other taxes and fees.

In a few weeks, after we have elected a new Governor, the state budget process will begin again. I will be watching to see how the SAL impacts that process. I welcome your comments.

This from Policy Matters Ohio

Forty-five percent of Ohioans would end up paying higher taxes while only 30 percent would see taxes lowered, based on an analysis of the details available on gubernatorial candidate Ken Blackwell’s plan for a flat 3.25 percent income tax. Meanwhile, the richest Ohioans would reap thousands of dollars on average in annual tax savings apiece when the plan is fully implemented, and the state would lose more than $800 million a year in revenue. Those were among the findings of an analysis by the Institute on Taxation and Economic Policy (ITEP), a research group in Washington, D.C., with a sophisticated model of the state and national tax systems. Policy Matters Ohio released the report, updating an earlier one. It analyzes a flat tax that would allow those making $20,000 or less a year after exemptions to pay no state income tax.

With one quarter of the fiscal year past, weak state revenue trends are a glaring red flag against additional tax cuts during the looming lame duck session of the General Assembly.

Financial data published by the Ohio Office of Budget and Management (OBM) show that September's total tax receipts were off by $66 million, or 4.1%, compared to their revised FY07 projections. As a result, year-to-date tax collections were below the agency's estimates by $37 million, or 0.8%.”

On a year over year basis, collections are $80 million, or 1.8%, below collections compared to first three months of FY 2006. To a great extent the collections reflect the impact of the first phase of a 21% across-the-board income tax cut and other policy changes enacted in the state budget (HB66). The collections are also down due to Governor Taft’s executive order which caused an adjustment to personal income tax withholding tables. The order caused FY 2007 revenues to be an additional $290 million, or 1.5% below last year’s collections.

Here are the details of how Ohio’s tax reforms are performing through the first quarter.

September revenues compared to OBM estimates:
non-auto sales tax - $483.6 million, or $37 million (7.1%) below estimates;
auto sales tax - $76.2 million, or $4 million (5.1%) below;
personal income tax - $837 million, or $40.3 million (4.6%) below;
corporate franchise - $17 million, or $13.5 million above;
kilowatt-hour tax - $34.6 million, or $2 million (5.9%) above;
tobacco tax - $87.5 million, or $314,000 (0.4%) below;
total tax receipts - $1.55 billion, or $66.2 million (4.1%) below.

Fiscal year-to-date revenues compared to OBM estimates are:
non-auto sales tax - $1.589 billion, or $60.2 million (3.7%) below estimates;
auto sales tax - $253 million, or $840,000 (0.3%) below;
personal income tax - $2.057 billion, or $2.46 million (0.1%) above;
corporate franchise tax - $56.4 million, or $23 million (69%) above;
public utility tax - $45 million, or $361,000 (0.8%) above;
kilowatt-hour tax - $93.8 million, or $196,000 (0.2%) above;
tobacco tax - $195.6 million, or $953,000 (0.5%) below;
total tax receipts - $4.327 billion, or $37 million (0.8%) below.

And, how about the economic gain purchased with the tax cuts? Ohio’s economy continues to lag the national recovery. For instance, we are still 140,000 jobs below prior recession. Hardly an economic boom. Why? Because tax cuts simply don’t have the simulative impact proponents argue they do. Economists at the Federal Reserve Bank of Cleveland have explored a variety of causes of state economic growth, and found taxes play no role in stimulating incomes, jobs or output. In fact, my work and a recently released report by Policy Matters Ohio clearly demonstrates higher tax states have sronger economies.

In addition to the policy changes eroding state revenues, the consensus forecast for the national economy calls for growth to slow to 2.5 to 3 percent over the coming months.

With a huge tax cut already in place and slowing national economic growth, its hardly time to destabilize the state budget with further cuts to the income tax, capital gains tax, or estate tax during the lame duck session.

Policy Matters Ohio and the Institute on Taxation and Economic Policy released a report today that found that a proposal to institute a 3.25 percent flat income tax in Ohio would increase taxes for 8 out of 10 Ohio taxpayers, result in a $273 million increase in federal taxes paid by Ohioans, and reduce state revenues for education, health care and other vital services by half a billion dollars a year. So who benefits the most under this proposal? The top 1 percent of taxpayers (those with annual incomes over $295,000) would see their taxes cut by $13,805.