Friday, August 29, 2008


Ohio Needs Its Income Tax

As well all know, Ohio continues to face challenges funding needed services. Our largest funding source is the individual income tax - we receive approximately 44% of current state general revenue funds from this source. However, there are some proposals to eliminate it.

The Buckeye Institute released a report this week which proposes to completely phase out the income tax over a 16 year period, and H.B. 534 is a bill in the state legislature that would completely phase it out over a ten year period. Even if the theories proved true that eliminating the income tax would attract people and eventually grow the economy, Ohio doesn’t have the extra funds to play around with.

Ohio's economy has been weak this decade, and the tax reductions in H.B. 66 haven’t helped that. As the 21% income tax reduction gets fully phased in, 2009 revenues will be reduced $2.2 billion from their base while providing very little relief for low and middle-income workers, according to a Policy Matters Ohio report, ‘A Step Toward Fiscal Balance: Options for Ohio’s Income Tax.’ The income tax is Ohio’s most progressive tax source – it is graduated so that those who can afford to, pay more. States that don’t have an income tax rely more on sales tax, which takes a greater toll on the poor. We have to fund state services one way or another. Eliminating the income tax would just force us to rely more on other tax sources that are less reliable, grow more slowly, and are more regressive.

Monday, August 25, 2008


Poverty Numbers May Change but Work Remains the Same

Every year at this time the Census Bureau releases data on how many Americans lived in poverty the year before, and how many were without health insurance. Every year we wait anxiously to see if poverty was better or worse than the year, and years, before.
Whether or not poverty has inched up or down as of 10AM on August 26th (when the Census Bureau releases its numbers), the facts remain the same. Demand at food pantries is at, or beyond, capacity to meet the need. Since January 1st of this year 43,000 more Ohioans have enrolled in Medicaid. Foreclosures are at record highs. We don’t need the data to tell us what we already know. Ohioans, like all Americans, are struggling.

As strains on the public safety net increase, legislators must take a hard look at the day to day challenges their constituents face and consider critical budget decisions that need to be made in the coming years. Talk of tax cuts and spending cuts, especially in an election year, may sound like common-sense tough talk, but governing is not that simple. Cuts, on either the tax or spending side, must be made cautiously to ensure adequate support for effective programs while enabling the growth of the economy. Not all tax cuts are equal. Nearly half of the national deficit is the result of tax cuts enacted since January 2001.
It is also time for a serious discussion about the need for strategic increases in revenue. While popular rhetoric argues that tax increases are bad for the economy, especially small business, in the 1990s tax increases accompanied even greater growth than we saw in the most recent recovery from 2001 to 2007. Just as our family budgets need to keep up with rising costs, so does our nation’s.

We will learn some interesting facts from the Census Bureau data. But when the dust settles, and we know which is the poorest city in the United States, our work remains the same; encouraging sound fiscal policy that invests in people and making sure people have access to those investments.

Friday, August 08, 2008


Tax Foundation's Tax Rankings Are Questionable

The Tax Foundation has released its annual report that ranks states by their residents’ state-local tax liability. However, there are a number of reasons to question the report’s reliability. The Tax Foundation again substantially changed its methodology from its previous report, suggesting that they doubt their own calculations. For example, Ohio ranked fifth highest in the Tax Foundation’s 2007 report published last year. However, their latest report changes Ohio’s 2007 ranking from fifth to eighth. The 2008 rankings place Ohio seventh in the country. Those disappointed by the ranking should be patient, because they may prefer next year’s 2008 revision. The report analyzes state fiscal year 2008, which ended June 30, however, meaningful data for this type of analysis are not yet available.

Also of note, the numbers are very tight - the bulk of states have similar tax liability. According to their latest report, Ohio is one of twenty-nine states with state-local tax liability between 9% and 10.5%. Putting the reliability issue aside, this calls into question the quest to move down ten or twenty spots in the rankings if this would only decrease taxes by one percent or less. Meanwhile, the price for this change would be the inability to provide the education, infrastructure, and public services that attract people and businesses to Ohio.

Thursday, August 07, 2008


Habat Delivers Comments on Medicaid Managed Care

Yesterday Director of Public Policy and Advocacy, John Habat, presented comments as part of the Medicaid Managed Care Listening Sessions held by the Ohio Department of Job and Family Services, Office of Ohio Health Plans. The text of his remarks can be found on the Community Solutions website.

In the next few weeks ODJFS will host three additional listening sessions across the state. Details can be found here.

Wednesday, August 06, 2008


Fiscal Year 2008 Wrap-up

The first year of our biennium budget closed on June 30 with over $800M left in GRF. We avoided a deficit through mid-year budget cuts, one-time funds, and delaying payment for 2008 expenses until July 1 (to use SFY09 funds). Both revenues and expenditures came in below original estimates. All major tax sources came in below estimate even though the estimates had already taken into consideration the effects of the 2005 tax reforms. The biggest shortfalls occurred in the second half of the fiscal year. Tax receipts came in below SFY07 levels while expenditures increased, indicating a growing structural deficit. Although we start SFY09 with challenges, the entire $1.1B rainy day fund remains available as a resource, economists expect the national economy to start picking up the second half of the fiscal year, we have an economic stimulus package with promising investments, and local governments can now expect to receive $150M to deal with the foreclosure crisis, which has been a major reason for our sluggish economy. Read more at SFY08 Summary.

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