Let the Buckeye State Be a Warning for the Other 49

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Ohio is facing a multi-billion dollar shortfall in its next biennial budget. Perhaps it comes as no surprise that, in this election year, current lawmakers aren't falling all over themselves to give specific details about how they would fill this gigantic hole. The aim of the Ohio Budget Planning and Management Commission is to offer "a strategy for balancing the state budget for fiscal years 2012 and 2013." This week, Policy Matters Ohio (PMO) submitted a lengthy report to the Commission offering detailed information on one of the reasons the state is in crisis — mainly the 2005 tax overhaul which slashed income tax rates and eliminated two major business taxes. PMO estimates that these changes alone cost the state $2.1 billion annually. This report should be required reading for the Commissioners and other lawmakers who want to understand why Ohio's budget is on shaky ground.

Lawmakers in the other 49 states should see Ohio's experience as a warning and not rely on the flawed hope that drastically reducing tax revenue will somehow jumpstart a state's economy. PMO says in their report to the Ohio Budget Planning and Management Commission, "the tax cuts have not proven to be the magic potion for Ohio’s economy. Key measures of economic performance show the opposite: Ohio’s economy has produced relatively fewer jobs, fewer manufacturing jobs, less overall output and lower personal income growth than the country as a whole since the tax overhaul was approved in June 2005. Ohio’s share of the nation’s jobs has shrunk since then from 4.06 percent to 3.87 percent."

We hope the Commission follows the recommendations noted in this report "that we revitalize the income tax, in particular for high earners, and restore revenue from business taxes to levels that existed prior to the 2005 tax changes. This would still leave the business share well below where it was 30 years ago. Ohio’s tax system should be overhauled to produce the revenue we need for public services and investments that support our economic success and maintain our quality of life."

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