Beasts of Burden: Ohio Taxpayers Bear the Weight of Expensive Local Government
Wednesday, January 2nd, 2008 By David Hansen
Here’s another FYI on an article you might have missed over the holidays — as I did.
The Dispatch reports on Indiana’s attempt to reduce local government in the Hoosier state. Ohio’s well-entrenched local government interests surprisingly argue that Ohioans don’t deserve a similar degree of efficiency and effectiveness for their local tax dollars.
The Tax and Expenditure Limit (TEL) proposal of 2005-2006 sought to limit local government because, as the Tax Foundation and Rep. Wolpert correctly note: Ohio’s local government is the biggest reason Ohio has the 5th highest tax burden in the country.
Only in Ohio are you subjected to a state income tax, a local income tax for the city in which you work, another income tax for the city where you live, and then an income tax for the school district where you live. Then there are the local sales tax add-ons of kinds. Not to mention the more common nationally local tax base of real property.
It doesn’t take much for a bit of tax restraint on the part of state government to be erased by local government. Look, for example, at the number of counties opportunistically enacting local half-penny sales taxes increases in 2005 when the state reduced a temporary penny increase by a half-penny. One day you’re paying a penny to the state and then the next day you’re paying a half cent to the state and a half cent to local government while watching state policymakers pat themselves on the back for their ‘tax reform’.
The Buckeye Institute has long noted the research (here and here, for example) on how taxes on either prosperity itself or the factors which create prosperity only leads to less prosperity over time.
If Ohio is to ever return to prosperity – to above average job and income growth – state leaders will have to take a lesson from Indiana and take responsibility for the entire cost of government in Ohio, even that created by local government.
After all, a taxpayer’s wallet, or the re-occurring cost calculators of businesses, do not distinguish between a dollar lost to state government and a dollar lost to local government. Each is an equal loss of economic freedom for the taxpayer or an equal subtraction in the rate of investment return for the business investor.
And local governments have absolutely no incentive in current law and politics to hold back on their own spending and taxation in the interest of making the state more prosperous. The cult of local control in Ohio, established in the 1912 amendments to the state Constitution (the same election which gave us our personal income tax – go figure), and carefully cultivated by tens of thousands of mayors, commissioners, other local government officials and employees, should be subjected to a significant policy debate.
Ohio simply can’t afford both extensive local control with its current taxation and spending and the size of state government it has now.
One or the other has to give.
If we would like to create jobs and prosperity in Ohio at the rate of a state like Texas, one of the surest ways to do that would be to reduce the taxes paid by Ohioans to the level of that paid by Texans. This would require cutting all taxes paid by Ohioans by some $9 billion dollars out of roughly $60 billion paid in taxes in 2005, according to the Census.
The elimination of the state personal income tax — and replacing it with nothing in terms of taxation — would accomplish this.
If the job of tax cutting were shared proportionally between state and local government (roughly 55%-45%), then several other means for cutting $9 billion in total taxation paid by Ohioans might be devised. Such as, cutting the state income tax a bit more than half, and eliminating the municipal income tax, etc.
The efficiencies of local government over state government claimed by the township lobbyist are probably not that great – if they exist at all. How frequently do we find in Ohio a city health department within a few miles from a county health department? And school districts with small pupil counts may have made economic sense in the days of the Northwest Ordinance when our school finance system was invented, but if Florida can operate today with 88 local school district superintendents, are we really getting that much more education of our kids with 612 superintendents here in Ohio?
In any event, the cost of government in Ohio will someday have to be reduced as there simply won’t be enough working taxpayers to sustain its current expenses. Ohio’s extensive, expensive local government will likely have to contribute to this reduction.
