Today’s DDN editorial, “Ohio’s GOP Senate to blame if cuts come” describes the needed postponement of the 4.2% income tax cut as “significant and painful.” According to the Chillicothe Gazette, Republicans in the Ohio Senate have agreed to a deal to postpone the 4.2% tax. The immediate budget crisis will be temporarily solved — by this two year delay. Calling this temporary solution “significant and painful” seems an exaggeration — compared to the hard budget decisions that within two years will need to be accomplished.
Ohio is at the point where it must deal with the whole question of taxation. Canceling the 4.2% scheduled tax cut, not postponing it for two years, should probably be part of a long term tax revision plan for Ohio. The state needs a secure and sufficient revenue stream. A small-d democratic solution would find a way to secure revenue, while at the same time making the system more progressive. A small-d solution would work to find truly “significant” solutions.
The financial bind that Ohio now suffers from stems directly from the Republican 2005 Tax Reduction Law. Phased in over five years, this 2005 law reduced revenue to the state by $2.5 billion, or so, each year. The economic recession has contributed to Ohio’s current financial shortfall, but the chief cause for Ohio’s state budget woe is the on-going impact of the 2005 Tax Reduction Act. (See lists of posts below.)
The shortfall of revenue to the state has had a lot of consequences. Zach Schiller of Policy Matters writes, “As approved, the budget slashed spending for important human needs, including mental health services and programs that allow seniors to stay in their homes and for children’s early care and education. At the same time, it insufficiently funded Gov. Strickland’s school plan, mass transit, libraries and food pantries, among other items. It relies on stretching out debt payments and using up reserves. This leaves a gigantic hole when the one-time sources used in this budget are not available.” Policy Ohio is recommending that Ohio, in order to generate sufficient state revenue, revise its tax code by both canceling the scheduled 4.2% tax cut and also imposing new additional taxes on large incomes.
This table shows that most of the 4.2% tax cut is scheduled to go mostly to upper incomes.
Ohio’s tax structure is regressive — meaning, the lower the income the greater percentage of tax that is demanded. According to a report from the Institute on Taxation and Economic Policy, almost every state in the union has a regressive structure. Vermont, New York, and the District of Columbia are cited as the most progressive. The report shows that Ohio’s tax on the poor is the 8th highest in the nation.
Here is a chart that shows the regressive structure of Ohio’s tax system — total tax paid by taxpayers in Ohio, as a percentage of total income, decreases as income increases:
Increasing the progressivity of the income tax would be one way to create a more equitable tax system. Here is a table that explains the chart in more detail:
The 2005 Tax Reduction Act was supposed to generate jobs. But this chart shows that Ohio has continued to trail in job production:
Here are other posts dealing with the 2005 Tax Reduction Act
- The Quinnipiac Poll Failed To Ask: “Shouldn’t Ohio’s Most Wealthy Be Taxed More?” March 18, 2009
- Governor Strickland Fails To Explain Impact Of 2005 Tax Reduction Act On Ohio’s 2009 Budget Shortfall January 28, 2009
- Gov. Strickland Should Seek Revision In Ohio’s 2005 Tax Reduction Law — Before He Asks The Feds For Cash Handout December 9, 2008
- Democratic Candidates For Ohio State Assembly Fail To Challenge Republicans On Crucial Budget / Tax Issues November 3, 2008
- Chris Widener, Republican Senate Candidate, Boasts About Tax Cuts, But How Will He Solve Ohio’s Budget Crisis? October 8, 2008
- Ohio’s 2005 Tax Reduction Law Diminished, By 21%, The Progressivity of Ohio’s Tax Code August 6, 2008
Mike, you state, “A small-d democratic solution would find a way to secure revenue, while at the same time making the system more progressive.” Why? Progressive means making the rich and upper middle class pay virtually all of the income tax. Yet poor people use their share of government benefits. They drive on roads and bridges, get police protection, use ambulance services, get food stamps, often get hospitalization free if they don’t have insurance.
There is a balance between making every body pay for what they use, and not denying the poor certain essential services. So determining tax burdens calls for a balancing act. “Progressive,” if overdone, can be a bad thing. When the wealthy move out of a state because of high taxes, the state loses. That is what has happened in California over the past few years.
Rick, the idea of “making the system more progressive” is to make the system more fair. The first chart shows that state and local taxes in Ohio make a system that is, in fact, regressive — the higher the income, the less percentage of income that is paid in state and local tax. Lowest income Ohioans pay 12% of their income in state and local taxes and highest income Ohioans pay less than 7%.
Most state and local taxes are regressive, and the 2005 Tax Reduction Act made an across the board 21% cut in income tax that succeeded in making Ohio’s income tax 21% less progressive. If there was to have been a 21% cut in the state’s revenue from income tax, it should have been distributed in a way that would not have changed the state’s tax structure overall progressiveness.
Mike, there is just one problem: in your view almost all tax cuts will be “regressive” because the poor and lower middle class pay very little in income tax. Your first table, “Impact of Restoring Rates to 2008 Levels,” demonstrates that the well-to-do pay a lot more in income tax than the more in absolute dollars.
If one-half of the top 15 incomes left the state, we would be in dire trouble.
I understand where you are coming from, the percentage of tax paid by the poor and lower class. However, that should be but one consideration on how to structure the tax. Everybody receives services and all should pay some amount..
Rick, I don’t think anyone here is proposing that the lower income groups pay nothing. But we all should realize that an over-reliance on value-added taxes (e.g., sales, gasoline, media) and property taxes is what’s causing the bottom 1% to pay around 20% of their real incomes in taxes, compared to the top 1% who pay around 12% of their incomes (and probably less thanks to their wider ability to get tax-deferred shelters).
Eliminate sales and property taxes and put everyone on a proper progressive income tax, and we’d see broad benefits. It would reduce government since you would only need an income tax collection procedure. Small business would be saved the time and expense of collecting taxes. People would pay tax when they had the income to do so, sparing farmers and the elderly from taxes on their land and homes when income does not match the bill.
And it would be good if all tax breaks were eliminated. Earn a certain income level, pay a predictable tax. Our forms for tax filing would fit on a postcard.
Too bad that the “fair tax” people are muddying the waters with their ill-conceived proposals.
Income tax is a regressive tax. It taxes labor. The more you work the more you lose. How is that incentive to continue to create economic value for society? Furthermore, Rich people buy less of their total income in taxable items. They save. What happens to savings? It is lent out as capital for other entreprenuers and projects. It becomes fuel for the economy.
I agree that property taxes are very ill-conceived and should be done away with. It does not honor property rights and it punishes the poorest among us, making it more difficult to acquire property and capital.
The state could certainly start by eliminating property tax and reducing services until the budget is balanced. The state should never run a deficit, it is not their money.
“Income tax is a regressive tax. It taxes labor. The more you work the more you lose. How is that incentive to continue to create economic value for society?”
You have to tax something that is worth something. You can’t tax something that is not, if you expect to fund government. If you work and gain more, even if some of it is taxed more you still keep the rest. Savings are beloved in our moral view but since we have been funding the consumer economy by debt rather than wages, savings became a thing of the past. The wealthy have been getting larger pieces of the pie but mostly this fueled speculation and Ponzi type fraud. You haven’t seen much investing. In this recession the banks and hedge funds have the most money, thanks in part ot the taxpayers, but they are not investing it.
Property taxes are a hardship on those who have property but no income to pay the tax. That gets people voting against school levies and other “popular taxes” that have to survive on a public vote. The Ohio Supreme Court found that was an unconstitutional way to fund schools but wouldn’t do anything about it.
Sales taxes fall more heavily on the poor. We should add in the Social Security tax that has a cap on the portion of income that is taxed and is also regressive for that reason.
The spearation between the rich and poor and decline of those in between is a social problem working against a cohesive and governable state. The rich are becoming a state of sorts to themselves, multinational and separated by gated communities, elite schools, offshore tax havens and the like.
Something must be wrong…truddick and I agree on five words. “Eliminate sales and property tax”
I would like to point out that you are all missing a huge point. The “value” received from the government. You have all been duped into looking at only half of the total equation.
From a paper published in 2004, “WHO PAYS TAXES AND WHO RECEIVES GOVERNMENT SPENDING? AN ANALYSIS OF FEDERAL, STATE AND LOCAL TAX AND SPENDING DISTRIBUTIONS, 1991-2004.
Abstract: “While the U.S. tax system is progressive, the distribution of government spending makes the overall fiscal system more progressive than is apparent from tax distributions alone. Using a microdata model we estimate the distribution of federal, state and local taxes and spending between 1991 and 2004. We find households in the lowest quintile of income received roughly $8.21 in federal, state and local government spending for every dollar of taxes paid in 2004, while households in the middle quintile received $1.30, and households in the top quintile received $0.41. Overall, tax payments exceeded government spending received for the top two quintiles of income, resulting in a net fiscal transfer of between $1.031 trillion and $1.527 trillion between quintiles. Both taxes and spending appear to have large distributional effects on households, and these effects have grown since 1991. The results suggest tax distributions alone are an inadequate measure of progressivity, and policymakers should examine both tax and spending distributions when judging the overall fairness of policy toward income groups.
I would encourage you all to view this report in its entirety but because I know you will not…
From Table 10: Government at all levels spends $8.21 per dollar received for the bottom 20%. Government spends $2.51 for second 20%. $1.30 for the third 20%. $0.77 for the fourth 20%. $0.41 for the top 20%.
Average state spending per group. $4.03, $1.91, $1.33, $0.93, and $0.61.
The only reason that it is even this close is because the 2 highest brackets are the most likely to utilize public higher education than the 3 lower brackets.
This was a wonderful paper that fully destroys the idea that the poor are being victimized by the wealthy via regressive taxation.
Want more evidence that taxes aren’t really regressive? See the analysis below.
Total Federal spending in 2009: 3.1 Trillion
Total us population: 308,000,000
This means that every us citizen should have paid about $10,000.00 in federal income tax if you apportioned it to only citizens. Want to know if you are a giver or a receiver of Federal funds? Look at your last pay stub. Did you pay at least $10,000 in Federal Tax? If you didn’t…your welcome. If you have children, tack on $10,000 per kid. Can’t make it work then? Your still welcome.
Trying to make me feel like I am not paying my fair share and that I have inflicted a regressive tax upon the poor is probably not the method you should use to thank me.
What is fair with regard to taxation? If you are going to force people to pay for a military, then do so by dividing the cost of the military among the number of days an individual is protected by said military. Example. If you are a foreigner staying in the US for 5 days then you must pay ((total military expenditure/total number of days spent by individuals in the USA)*5). The same could be done for all services that you all clamor should be provided publicly… education… fire… police… etc. Let people realize their fair share of the costs and see if they demand better. I think they would.
So, Stan, would you forbid the rich from living in gated communities and sending their children to elite schools?
Stan, would you forbid the rich from … sending their children to elite schools?
If constitutionally inadequate curricula in poor schools bolsters the Democratic Party’s base, maybe inadequacy for all is a good political strategy (for the Dems, anyway).
Note that the new budget (HB-1) certainly makes it harder for good suburban schools to pay teachers by devaluing their contribution to students’ education.
Probably a law against gates is not a good idea. However paying for the gates with tax cuts or similar policies is not either. More important is policies that make the rest of society so undesirable that the rich feel the need, or desire, to gate themselves off. And sepataing the rights and privileges of the rich from everyone else, shrinking the middle class and things of that sort. In a capitalist system the rich control the investments upon which everyone else depends. When they are separated from the consequences of this bad things happen. A small piece of this is visible with the bonuses that bailed out financial entities are paying to their top executives, but that is the tip of the iceberg.
Teachers I know don’t want bad schools and their unions don’t either. Bad inner city schools are a result of a lot of social policies that create and concentrate poverty and let others escape it.
social policies that create and concentrate poverty…like minimum wage and rent control.
:)
Happy New Year!
Bad inner city schools are a result of a lot of social policies that create and concentrate poverty and let others escape it.
Should I be encouraged that Ohio’s Democrats are fighting policies that help “others escape it [poverty]?”
Teachers I know don’t want bad schools and their unions don’t either.
I’ll take your word about teachers you know, but I’m curious about your insight into their unions. Are the “wants” of teachers’ unions determined by union members or union staff? Do the staff have the skills necessary to advance the “wants” of the members?
Do teachers really support dumbing-down of our current academic content standards?
Bad inner city schools are a result of a lot of social policies that create and concentrate poverty and let others escape it.
Now there’s a civics lesson in the making! Name some “social policies that create and concentrate poverty and let others escape it.”
1. Redlining
2. Busing
3. Ineffective compensatory education
That pretty well covers the three branches of federal government.
Now, what suggestions might our hypothetical high school civlcs class make?
Eric, under the Constitution, the federal government has no role in education.
under the Constitution, the federal government has no role in education
Please relate the above remark to:
1. Brown v Board
2. Elementary and Secondary Education Act
3. Past federal policies which concentrated poverty and ensured that property owned by Blacks would not appreciate as quickly as property owned by Whites.
There’s quite a gulf between Rodriguez and “no role in education.”
Eric, good questions. Brown v Board of Ed was not litigation concerning the role of the federal government in education. Rather, plaintiffs brought suit to stop and remediate unconstititutional action by the state of Arkansas to segregate the races in schools. This action was brought under the Fourteenth Amendment.
Federal statutes such as the one you mentioned are unconstitutional because they do no relate to enumerated powers. Under the Tenth Amendment, those powers not specifically enumerated in the Constitution for the federal government are reserved for the states and the people.
I do not know specifically what you are talking about in #3, therefore, I can’t comment.
Anybody willing to consider my suggestion of “stop creating policy and leave people alone?”
Federal statutes such as the one you mentioned are unconstitutional
And yet they withstand court scrutiny–perhaps another opportunity for a high school civics lesson.
Redlining flows from federal housing policies which presumed racially integrated neighborhoods were unsound investments for federal housing aid. Thus Dayton has poor areas–formerly flood-prone and with little appreciation. Houses in the hills immediately south of Dayton have been good investments over past decades for the those permitted to buy.
Stan likely has a better handle on some of these particulars.
But back to the question, what might our hypothetical high school civics class do?
Anybody willing to consider my suggestion of “stop creating policy and leave people alone?”
That would require a change to current policy.
Leaving people alone worked best when people were self-sufficient and free to leave for America’s frontier. Nowadays, they are more likely to be recruited by “progressives” and told that the limited government folks are their enemies and the ballot their best defense. If we want voters to give limited government a fair hearing, that might require a change to Ohio’s social studies standards
“Leave people alone” is itself a policy.
As for arguing fine points of constitutionality, I find that less enjoyable than trying to find real-world solutions. I don’t care if the government oversteps its bounds or if someone legislates from the bench so long as people are generally better off for it. Limiting oneself absolutely by a rigid interpretation of what some men wrote back in the days before plumbing was invented–is that a sign of wisdom?
The fact is, nations that have a centralized, national public education system spend less money on education (consider the costs of having a board of education and superintendent in every little Ohio city), and their students have for decades out-scored ours in reliable achievement tests.
Your choice: kiss the constitution even if it doesn’t work, or look around for what works and implement it. I know which one I’m promoting.
I don’t care if the government oversteps its bounds or if someone legislates from the bench so long as people are generally better off for it.
Does “better off” include being “educated” to “appreciate” your sensibilities of “better off?” If so, please consider sharing your vision of “better off” through the social studies standards revision process…
Not to mention, freedom, justice and the pursuit of happiness. They are old hat on some crappy document. Those are not ageless ideas, they may have been right for the time, but who wants to be free when we can be owned by the state? I often tell my neighbors EXACTLY how they should live, because they would be better off. They dont listen, so I am forced to bring it to a vote so that I can FORCE them to live better.
Truddick, you are an asshat.
I am forced to bring it to a vote so that I can FORCE them to live better
Professor Ruddick beat you to it. His guy won and will be reforming Ohio public education so we can all be “better off.”
So if your vision of “better off” differs from that of truddick and his fellow travelers, now’s the time to speak up.
I think I just did.
if your vision of “better off” differs from that of truddick and his fellow travelers, now’s the time to speak up
Robert: I think I just did.
Yes, indeed you did. However, if you want to be heard in Columbus, here’s a better choice of forum:
Science and Social Studies Standards Available for Review
Be assured that any state board member who listens to your concerns will be a target for Professor Ruddick and his colleagues come election time. It doesn’t make running a “thorough and efficient system” of public schools any easier when Ohio’s educators use the ballot to censor the social studies necessary for children to receive a “thorough and efficient” education. Of course, such observations aren’t likely to make the high school social studies curriculum.
Truddick,
I couldn’t agree more that “leave people alone” is a policy. It is one that protects the natural rights of man and is consistent with the natural world in which we all engage and upon which we all depend. The good news for my statement, is that we don’t have to create that policy. Freedom is the policy that flows naturally when you remove coercion and force. It is “from nature” as a famous thinker once said.
Who are these “people” who are “better off” and at whose expense were they made “better off”? And this “bettering” is best done by removing the system of checks and balances because?
Wonderful logic on the centralization point. We should do it with food too. Think of the additional expense in having McDonalds be a completely different organization than Wendy’s and Burger King! My God…it is the holy grail of solutions! Force everyone to do everything the same way as directed by you! You, being the smartest and best person in creation, in all fields, will surely lead us into greatness. If you run into any trouble…not that you will…call up the Chairman, Stalin, Hitler, etc. They were all special too…just like you.
While I have stated repeatedly, I am not a Constitutionalist. I am a fan of individual liberty. I do not kiss the constitution nor to I restrain my logic to the same trains of though that those men who created it followed. I am restrained only by reality. You do not seem to be restrained by reality. You seem to want to make reality up. You seem to want to be able to legislate into existence scarce resources. You seem to want to give to someone without acknowledging that you are taking from someone else. I do admit that given a choice between your world and one where a strict, negative rights protecting, constitutional government was an option, I would choose theirs.
We try to imitate the rest of the world when what they are doing appears to be the best thing to do at the moment, regardless as to individual rights. We have done so for years. Fed? Eliminating the Gold Standard? Fannie May and Freddie Mac? These concepts were imported. They were going to make the American people rich. Maybe even homeowners! How is that working out for us?
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” Thomas Jefferson.
http://mises.org/story/3161
As a general aside; how does it feel being intellectually undone by a person who lived before plumbing was invented?
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” Thomas Jefferson.
Nice quote from Jefferson, but not one the libertarians, tea party protesters and the like have picked up on.
I am not a Constitutionalist. I am a fan of individual liberty.
So why should oath-sworn public officials listen to you? Are you suggesting that anyone willing to defend the Constitutions of the United States and State of Ohio doesn’t have their facts straight?
Is it possible that Rothbard’s works are historical revisionism in the service of an ideology inconsistent with constitutional government?
You just conceded the case that free market K-12 education can serve the goal of public education for citizenship in a representative constitutional democracy. Or did Ben Franklin have something else in mind for “a republic if you can keep it?”
Where did he concede this?
Eric, I also went to that link and it said they were only accepting info up until the end of the year, so I guess I missed the boat. Thanks for the opportunity to pass air across my vocal cords in a more formal digital playground.
post here:
http://www.stateofohioeducation.com/2009/11/science-and-social-studies-standards.html
don’t worry about the ODE deadline (but don’t use their site for posting, either–that deadline is now past)
The important concern to raise is whether the draft standards falls short of what new voters need to know–about history, or civics, etc. That is, is the constitutional purpose of K12 being met?
It is possible that Rothbard is a historical revisionist but you would have to site some contradictory primary sources to disprove his primary sources. Having read much of Rothbard’s work in the area of banking and economic history it seems very consistent to me.
Is it possible that whatever you are reading that contradicts Rothbard is historical revisionism?
I didn’t ever concede that public education is reasonable. Even if I were a Constitutionalist I would not be forced to concede that public education is good as there is NO Constitutional mandate for government to provide education.
As for the best way to ensure that the republic is upheld…the Second Amendment is my choice.
Emotional attachment to guns comes from some dark place of the heart, but the pratical consequences are homicides and suicides from rash acts and accidental bloodshed. It is unlikely to “uphold the republic” against modern militaries armed with tanks, drones and modern aircraft.
Public education has been around since the Constitution started, and has done just fine most places. Bock thinks it could be better, which is true. However the worst functional places is where poverty and its culture is concentrated and everyone else has fled, a much bigger social problem than how schools are run. Certainly not a problem that would be solved if schools were organized like fast food franchises.
As for the best way to ensure that the republic is upheld…the Second Amendment is my choice.
No doubt the non-Constitutionalists on your left have already figured this out and are progressing on their own agenda…
Personally, I’m quite attached to the rule of law, starting with the Constitution.
Does a candidate’s endorsement from the NRA reflect favorably on the candidate’s ability to protect and defend the (entire) Constitution? What about an endorsement from the NEA and other teachers’ unions/affiliates/PACs?
This just in: Which major American political party, through its actions during a campaign, embraces the slogan, “ignorant citizens are our only sustainable electoral advantage?”
Hints:
1. This mailer “could be related to the fact that internal Dem polling reportedly shows Coakley under-performing with less-affluent women.” Coakley’s opponent contests the mailer as a false campaign statement.
2. “Hi, this is President Barack Obama. … Martha Coakley … represents the best progressive values of Massachusetts. She‘ll be your voice and my ally.”