The challenge for Ohio to recover the 250,000 jobs it lost during The Great Recession is on… the million dollar questions is, can it be accomplished by the end of 2013? Creating 250,000 jobs in Ohio would translate to at least a $360,000,000 increase in Ohio Personal income tax collection.
The good news is that records show that since January of 2010, 135,000 new jobs have been created. The Kasich administration took office in January 2011, so they can certainly take credit for 80,000 of those new jobs.
So what is on the horizon?
The expansion of gambling should create 34,000 jobs, as touted in the 2009 campaign. One campaign spot that featured FOP Vice President Scott Tipton claimed 19,000 construction jobs and 15,000 full time jobs would be created if Ohioans voted “Yes”. And we all know they did just that with the hopes of new jobs.
During the last year, advocates of the Ohio oil and gas Industry issued a “fracking” study and claim that it will create 200,000 jobs by 2105. Just a few months later, another study decreased that number to 100,000 new jobs. Not to be outdone, OSU conducted their own study, which seems the most reasonable, stating the number of newly created jobs attributed directly and indirectly to fracking – and under the the properly controlled drilling operations – will be closer to 65,000. No matter which study you choose to embrace, the employment numbers are a sight for sore eyes to many Ohioans.
When – and if –the Franklin County Court rules on the constitutional viability of VLT’s at Ohio’s seven race tracks, another estimated 5,000+ permanent jobs will be added to the state’s economy.
Yet much work still needs to occur and our Ohio economy must be diversified to help avoid another economic downturn.
That’s where JobsOhio comes in. I had the opportunity to experience this true gem of Ohio government last week when I joined Republic Steel to discuss the status of their expansion in Ohio. I was surprised and stunned when I walked into the new offices of JobsOhio located in the Huntington Center. The floor to ceiling windows overlook the Statehouse, which never ceases to impress. But more importantly, products from around our great state are on display in this high tech, state of the art facility. JobsOhio seeks to create the high tech, service and manufacturing jobs that were promised with the passage of the 2005 Ohio Tax Reform.
But how will the volatility of the national economy effect the critical task at hand for JobsOhio? You may recall a few months ago when I wrote about Okun’s law and how it correlates the GDP growth and unemployment rate. The data has been collected since 1949 and has clearly establishes that if the GDP does not grow between 3 and 4%, there is a strong likelihood that the unemployment rate will rise. Economists had predicted that our economy would expand at a 2.5 percent annual rate for the first three months of this year. However, the Commerce Department said it grew just 2.2 percent, because of government budget-cutting and a slowdown in business investment. That small GDP rate could constrict job development in Ohio.
So what can Ohio do now to create jobs for the next five years? That’s remarkably simple, you just need to hear Governor Rhodes calling from heaven, “Roads… fix ‘em and build ‘em”.
I subscribe to a news service that allows me to find articles from around the state. Recently, I searched for all stories that had “infrastructure needs” in their text and that appeared within the last 12 months. As expected, a ton turned up – actually 1,875 articles. Though I like to read, that’s pushing it but after a quick review, the majority of the stories indicated that Ohio needs to improve it’s roads and bridges and the figure to do so that appeared the most was $1.6 billion.
How do we get that much money in the short term? We could get the revenue from passing a Joint Resolution to place the issue on the ballot, which we have done in the past,. We could take it out of current revenue, or do what 19 other states, like Florida, New York, and Texas have done and that is to issue prepaid insurance tax credits. Please allow me to explain.
The Ohio Insurance Franchise Tax is a premium tax imposed by the state for the privilege of transacting business in the state.
This is not a new tax.
- It is imposed on both domestic and foreign insurance companies doing business in Ohio.
- The tax is paid by insurers at a rate of 1.0% or 1.4% of gross premiums collected.
- Tax collections have a diversified base of payers.
Even with the deep recession felt by Ohio, collections have only modestly declined indicating that this revenue source is relatively recession-resistant. Even in the most conservative world, the revenue source is stable and regular.
An Insurance Franchise Tax Credit Program allows insurance companies to pay, in advance, a portion of their expected future insurance franchise tax obligations (which are based on insurance premium revenues) to the State.
In return, the insurance company payers receive a credit against future Insurance Franchise Tax payments in Ohio.
Ohio may authorize up to $1.25 billion in Tax Prepayment Certificates that can be sold to insurance companies who prepay, in cash, their Ohio insurance Franchise tax liability.
Insurance companies are effectively getting a discount on their future tax obligations.
Insurance Franchise Tax Credits (“IFTCs”) represent evidence of a tax prepayment and are not a bond/debt obligation of the State. In addition, an Insurance Franchise Tax Credit Program could generate substantial upfront proceeds to the State.
The chart below compares prepaid tax credits to a traditional bond issue.
|Prepaid Tax Credits Program||Bond Issue|
|Tax Code Limitation on Use of Funds or Investments||No||Yes|
|Lowest Cost of Funds||Yes||No|
The upside to all of this is that the State of Ohio would receive 1.1 billion dollars upfront that would be spent to create immediate jobs, repair our roads and bridges, and begin the moth-balled, road expansions that are desperately needed in some of our growing communities. An added benefit is that local communities, stinging from local government fund cuts, could find some relief. All of this could occur in a five-year period. Once Ohio reaches its 250,000 jobs recovered, growth in just a few of the state’s tax sources will balloon to well over $500 million, which easily pays for the yearly cost of $125 million for the 10 years of the tax credit.
Sounds too easy to me, but as I always say, “What do I know, I’m just a lobbyist?”