Eliminate Income Tax and See Ohio Thrive
What should the state do to stimulate Ohio's economy? That's the
question many Ohio residents and politicians are asking as the state
continues to stagnate. Unfortunately, some seem to ignore the main
problem facing the state - its oppressive tax climate. Without
fundamental tax reform Ohio will continue to see jobs locate elsewhere
and population growth dwindle.
Every year the nonpartisan Tax Foundation rates states based on their tax climate. Those who burden their citizens with heavy taxes that kill jobs and strangle economic activity rank at the bottom. In recent times, Ohio has ranked near the bottom every year.
The results of this are obvious. One of the things politicians from both parties agree on is that Ohio's economy is in trouble. Even during the good economic times of a few years ago, Ohio experienced lower-than-average economic growth. Now that the nation's economy in stagnating, Ohio is suffering even more.
Ohio policymakers recognize that the state has economic troubles, but their proposed solutions do not offer the fundamental reforms needed. Governor Strickland and legislative leaders want to borrow money to spend on politically popular projects.
Using taxpayer money to provide political favors does nothing to reform one of the main problems plaguing the state - its high taxes. But a few people in Columbus seem to get it. They want to scrap the income tax completely.
This idea has been greeted with skepticism by many who think that government, not taxpayers, can better spend the money earned by Ohioans. But as a recently-released study by the Buckeye Institute illustrates, eliminating the state income tax is the best thing the state can do to spur economic growth.
Unlike borrowing money or merely redistributing funds from one area (say, anti-tobacco funds) to another (say, broadband), eliminating the state income tax will actually produce economic growth. It's not a matter of dividing up a stagnant pie - getting rid of the income tax will make the pie bigger. Dr. Eric Fisher, who completed the Buckeye Institute study, estimates that it could increase economic activity in the state by 3.5% over the next decade.
Some opposed to this plan point to the large reduction in tax revenue that will result and question how that can be replaced. The very question makes the assumption that this revenue belongs to the government, not the people who actually earn it.
But setting aside the philosophical issues, there will certainly be less revenue for government services if there is no income tax. However, there are other ways to provide this money. A few states - such as Alaska, Florida, Nevada, Texas, South Dakota, and Washington - have no income tax. They seem to get along pretty well. Their schools are funded, their police patrol the streets. And, generally, they are doing better economically than Ohio. If they can do it, why can't Ohio?
In his Buckeye Institute study, Dr. Fisher estimates that three-fourths of the reduced revenue will be made up through increased economic growth. The other third can be addressed by cutting wasteful state spending. Whatever the path taken, the elimination of the state income tax would not shut down the state government.
Ohio needs strong political leadership to address its economic decline. The failed programs of Governors Taft and Strickland have only resulted in a continuing slide into stagnation. Eliminating the state income tax will revive Ohio's economy and give more freedom to its citizens. If political leaders are serious about helping turn the state around, they should embrace this bold idea instead of relying on the failed policies of the past.
Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus, Ohio.
