BuckeyeBlog

Add one dose of flawed thinking on taxes, another dose of misplaced outrage at “outsourcing,” some nifty Presidential rhetoric about “tax havens,” and what do you get? A Presidential tax plan that, as the Cato Institute’s Dan Miller observes, will hurt American businesses and provide a boon to foreign companies:

First, the good news: Although it’s not ideal that legislators have advanced a bill to impose a foreclosure mortorium, they did remove the egregious (and unconstitutional) “cramdown” provision that would allow judges to modify home loan contracts. As the Buckeye Institute’s Maurice Thompson said in his testimony about this bill: “House Bill 3, as currently written, would clearly raise interest rates for prospective homeowners, thus harming more Ohioans than it would help, and enhancing the likelihood of increased delinquencies.” The removal of the “cramdown” provision lessens the harm to Ohioans but does not eliminate it.

Now, the bad: Get ready for your taxes to go up. As the Toledo Blade reports, “Gov. Ted Strickland yesterday said he won’t take the possibility of a tax increase off the table as he negotiates with legislative leaders over how to deal with the state’s budget woes.” It does go on to say that the governor doesn’t think such a hike is a good idea. At least he’s paying lip service to keeping taxes in line, but the amount of spending he supports makes it a virtual necessity, unfortunately. As I pointed out a couple months ago:

When there were rumbles in the air of an impending recession in 2007, the governor and legislators could have done the prudent thing: limit spending growth, refrain from creating new programs, and planned for the future. Instead, with only one dissenting vote, the Republican General Assembly sent a big-spending budget to the Democratic governor that, among other things, created a new middle class entitlement to government health care.

Now taxes will need to be raised to pay for this fiscal recklessness. In the past the governor has denied the need to do this and, in an attempt to avoid making the hard decisions, got the federal government to pony up billions of “stimlus” dollars to cover the state deficit. Now it appears he can no longer avoid the issue. Too bad it’s the taxpayers who will, literally, be paying for the bad decisions in Columbus.

In a recent Hamilton Journal-News editorial, U.S. House Minority Leader John Boehner cited our study about the dangers of the federal stimulus plan: “The Economic Impact of Federal Spending on State Economic Performance: An Ohio Perspective.” In his editorial, Boehner laments our return to the era of big government and the negative consequences of doing so. Job losses, slower economic growth, higher taxes, and a big burden passed on to our children and our children’s children. When will it end? And when will certain policymakers pick up history books and learn from our past mistakes?

We may not be in Boston but that didn’t stop more than 7,000 people from crowding the Statehouse steps April 15, 2009 for a “Columbus Tea Party.”  Tea Party protests popped up all over the country on tax day and the one here in Columbus was not that different.  What was different here though was the reasoning behind the protest.  Traditionally Tea Party protests on tax day are used to protest just that, taxes.  Here in Columbus people were less concerned about taxes and more concerned about government spending.  The crowd was angry, scared, and most of all passionate.  Most expressed their anger over the various stimulus bills passed by both President Bush and President Obama.  Others were angry about other issues including the bailout and an Obama Presidency.

No matter which side you are on, the left, the right, or in the middle, seeing a crowd that size is democracy at its best.  See the Columbus Tea Party for yourself by clicking on the link above.

We hope you are enjoying Tax Day. It’s always good to be reminded of the burden government imposes on the productive. Now if we could only do something to reduce that burden…

Until then, the Cato Institute has produced a good video talking about “Our Troubling Tax System”:

I’m sure you’ve noticed, but Obama has been getting some pretty bad press lately. From his bloated stimulus plan to his 60 Minutes appearance to his patently offensive Special Olympics comment on late night television.

But bad news for Barack – the press isn’t going to get any better, especially with his new cap and trade plan now on the table.

The plan entails selling permits to emit carbon, which businesses may pay for at the outset, but the cost of which will quickly be passed on to consumers.  What Ohioans need to take note of is how deeply unequal these costs will be distributed across regions and income groups.

Ohioans receive roughly 86% of their electricity from coal. Our neighbors Indiana (94%), Pennsylvania (56%), and West Virginia (98%) are in similar situations. This means we’ll get hit especially hard, and during a time when we’re already feeling the pain.

To put it in real terms, the Congressional Budget Office estimates that the average household in the bottom income quintile will spend $680 more every year to pay for Obama’s plan.

It looks like Ohio will, in one form or another, give tax credits to film companies which do business in the state. The general principle is good — lower taxes to spur economic growth — but the method is flawed. Tax breaks for special industries isn’t the best tax policy to help the state’s economy grow. Cutting taxes on businesses and marginal tax rates for individuals is a much idea.

It’s probably true that lower taxes on film companies will draw them to Ohio. Why should they be singled out for this benefit, though? Why not lower taxes on restaurants, factories, car dealerships, book stores, movie theaters, and every other business in the state? Don’t legislators want these businesses to expand in Ohio, too? And what about the state’s citizens? With so many of them losing jobs and struggling under high federal, state, and local taxes, I think it’s a bit strange to be rewarding Hollywood companies without so much as a debate over cutting Ohioans’ income tax rates.

Good tax policy means low rates on taxes that are broad-based. No breaks for favored industries. It’s unfortunate that the General Assembly is debating a special interest tax break instead of considering overall tax reform. If they want to get started, the Buckeye Institute has published a proposal to phase out Ohio’s income tax and has written about the five steps lawmakers should take to institute a pro-growth tax policy.

The Denver Post reports that Colorado politicians are bent on evading or simply over-riding the state’s constitutional Taxpayer Bill of Rights (aka TABOR or TEL here in Ohio).  Writer John Andrews asked my opinion of what’s at risk if Coloradans acquiesce to these moves:

“Watch out, Colorado. Without TABOR you could end up like Ohio,” warns David Hansen of the Buckeye Institute in Columbus. He describes a “generation-long spending spree” that has turned their low-tax, high-growth state into one with high taxes and no growth, “totally uncompetitive in the 21st century.”

Despite our national march toward socialism, government has nothing to give that it hasn’t first taken away from the private sector.  Growing government can only come at the cost of the private sector.  Colorado’s TABOR limited the growth of government and as a result, it is a state with jobs, growth and prosperity. 

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The Cato Institute recently released its Fiscal Policy Report Card on America’s Governors: 2008. Ohio Governor Ted Strickland received a letter grade “B” for his taxing and spending records. According to the report:

Governor Strickland succeeded in his goal of passing an expanded homestead exemption under the property tax. He is also following through on a phased-in replacement of Ohio’s corporate franchise and business property taxes with a gross receipts tax. The plan is supposed to result in a large net tax cut for businesses. On spending, the governor supports large increases in the education budget and is pushing an expensive debt-financed energy plan. But with the state facing a budget deficit this year, the governor is taking steps to trim spending.”

Kudos to Don Brey and the 10th District Court of Appeals: The CAT tax is a sales tax, dammit, and legal and linguistic loop-de-loos can’t change that essential fact. This reverses a lower court opinion to the contrary, and there is next to no doubt that it will be appealed to the Ohio Supreme Court. My guess is it’s a coin flip at best, even more likely than not that the high court will reverse and reinstate the lower court decision.

They’ll be wrong to do so, and knock on wood, maybe they won’t. The line between legislative power and judicial power is a tough one, and a great deal of deference is paid to the legislature. Still, the court plays an important role, including making sure that the legislature is playing by constitutional rules. The CAT tax is more or less the opposite of transparency in government, on two grounds, revealing the amount of the tax and also calling it what it is, and shame on the General Assembly for that.

More generally, there are many problems with the CAT. It’s generally hidden from view-they’ve even made it illegal to disclose the amount of it on the sales receipt, which is contemptible and ought to be unconstitutional. It’s also an open door. Any time the legislature feels it needs more money–which happens, what, every other day?–a closed door conference will be able to raise the CAT rate with very little opportunity for public review. If the day comes when reporters are busy with other stories, the budget looks particularly grim, and the General Assembly is filled with people who gain a moral sense of worth out of spending other people’s money, watch out. Ohioans will find their taxes raised more or less behind the scenes.