Comparing Impact of CAP and TEL on Ohio Taxes and Spending
Comparing CAP and TEL Proposals’ Impact on Ohio Taxes and Spending
COLUMBUS, Ohio. --- -The Buckeye Institute for Public Policy Solutions has produced this analysis comparing the impact of the CAP proposal as described in the media last week and the TEL proposal on the ballot in November 2006.
Between 1995 and 2005 the CAP proposal would have provided no restraint on state taxes and spending, according to our analysis.
“Acknowledging the need to constitutionally restrain taxation just as we now constitutionally restrain government borrowing is an important, positive feature of the CAP proposal,” said David Hansen, President of the Buckeye Institute for Public Policy Solutions.
“A weakness in the proposal is that it locks in an all time high level of taxation that is currently costing Ohio jobs and investment,” continued Hansen. “Ohio’s future needs stronger tax reform than this.”
The CAP proposal sets permitted taxation at 5.5% of Ohio’s total personal income. The Buckeye Institute calculates that in Fiscal Year 2005 state taxes were 5.42% of state income. As recently as 1994 state taxes were 4.9% of Ohio personal income.
“By setting its limit above the high water mark of 2005’s level of state taxation, the CAP proposal says in effect that no mistakes have been made in the policy choices that have led to the seventh highest state and local tax burden in the country. On the contrary, Buckeye Institute research has repeatedly documented how growth and prosperity are lost as state taxes have increased,” said Hansen.
Looking again at 1995 through 2005, the CAP and TEL proposals are $27.3 billion apart in terms of fiscal impact.
By tying state spending and taxation growth to the growth of population and inflation, the TEL would have saved state taxpayers a total of $15.3 billion compared to actual spending if it had been effective beginning in 1995.
Since the CAP sets a limit of state taxes as a portion of total Ohio personal income above any level seen during 1995 through 2005, if effective from 1995 the proposal would have permitted an additional $11.9 billion in spending beyond actual spending.
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David Hansen is the President of the Buckeye Institute, a nonpartisan policy research organization based in Columbus, Ohio.
