Should Ohio Legislators Consider a Tax Cut?

The 2010 Annual Ohio Taxation Report is stuffed with pertinent facts about tax collection Ohio. Just one is needed to describe Ohio 5,375,161 income tax payers.

Ohioans earned $303,135,661,462 in 2010 and paid total income tax of $8,346,124,605. That’s an effective rate of 2.53%.

The most stunning fact is that 2.26% of the Ohio taxpayers paid over 33% of all income taxes collected in Ohio. More shocking is that workers who earn at least $100,000 or more pay 57% of all taxes deposited into the General Revenue Fund for Ohio’s treasury.

Those Ohioans who make $20,000 or less represent 1,708,694 tax payers who contribute ONLY 1.26% to Ohio’s total income tax collection. What’s even more ridiculous is that the $75.9 million collected represents less than 1% of the total $8,346,124,605 in income tax collected by the state during 2010. Hey do we really need to collect a tax from the working poor. I say keep it…but wait let me go on.

The highest effective tax rate of 3.47% was paid by earners in the wage category of $80,001-$100,000. The lowest of 0.01% was paid by workers who earned $5,001-$10,000.

So, what is the worth of a 1/10 of a percent effective rate tax cut? If we take $8,346,124,605 divided by 25.3 we get $329,846,822. Which means if we wanted a 1/10% effective tax rate cut we would need to find $329,846,822 to pay the tab.

This brings me to the January 2012 financial condition of the state of Ohio. Both LBO Budget Footnotes LBO February Budgets Footnotes and OBM Monthly Financial Statement OBM Monthly Report Feb 2102 concludes, that with 7 months completed of this 12-month budget, revenue exceeds estimates by $147,142,000 and that’s after we account for the delay in issuing the JobsOhio bonds. Expenditures are way under by $430,242,000 but that could be attributed to ODJFS’ MITS project and other timing issues.  Please keep in mind that last year at this time we never expected to end FY 2011 with an over 900 million dollar surplus.  I predict that with 58.3% of 2012 completed – and if the trend continues – and we issue the JOBSOHIO bonds, the surplus could fall some where between $1 billion and $1.4 billion. Better yet, if unemployment continues it’s decline this prediction will be too low. It almost looks like the Voinovich years (when the state made cuts and raised taxes only to rack up big surpluses when the economy improved) or at least that’s what I read in Ohio Politics… last weekend.

It was during the last term of Governor Rhodes that I learned some very easy budget “tricks of the trade” made during the hectic budget process. After many attempts to Underestimate GRF, overestimate expenditures and underestimate Federal Funds, which are either used to reimburse Ohio’s Medicaid expenses or as grants awarded to various programs, that I began my skeptical look at revenue and expenditures.

I conclude that a simple tax plan of eliminating taxes paid by workers earning $20,000 or less and an across the board reduction of 1/10 percent should cost about $405,000,000. That leaves plenty leftover to RESTORE some cuts made to Medicaid providers like Ohio’s nursing homes, FUND community based capital bill for economic development, SUPPLEMENT more money into our local schools so they can avoid more cuts or higher property taxes, and UPLOAD more cash into the Budget Stabilization Fund. Sounds easy to me!

SUPPLEMENT-UPLOAD-RESTORE-FUND:  Let’s SURF the wave of prosperity!

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