The House Tax Reform Legislative Study Committee has been touring Ohio to hear from citizens and local leaders how state tax policy is affecting their community. After attending the session in Cincinnati, I’m pretty concerned that legislators are being given misleading information from the Kasich administration.

I mean to be factual here, not ideological. While I disagree with these policy recommendations, my point is that they’re fallacious arguments that 1) aren’t indicative of the reality in Ohio or 2) don’t say what administration officials claim that they say.

First, we’ll take Ohio’s “Total Maximum Income Tax Rates” compared to those of our neighbor states. This is the testimony of the Ohio Department of Taxation:

Ohio Department of Taxation graph

Why, Ohio’s income taxes are off the charts! No wonder everybody wants to live in Indiana and West Virginia. But wait; Ohio’s top tax bracket was 5.9%. So how does the Tax Commissioner get 9.8% as Ohio’s top income tax rate?

That’s the income tax rate in Oberlin, Ohio1, and nowhere else. Oberlin levies a municipal income tax of 1.9% and Oberlin City Schools levies a 2% income tax on its 11,916 residents.

On top of that, only 1.6% of Oberlin’s residents earn over $200,000 annually–and even they were only taxed 5.9% on income over $204,000.

When the Tax Commissioner gives Ohio legislators factual data on Ohio’s tax rates, he’s talking about 191 people who, if they wanted, could simply move to New Russia Township2.

We shouldn’t neglect the 25 people in Metamora or the 28 in Bremen who pay 8.9% on income over $200,000.

If the Kasich administration wanted to be forthright with legislators, they would talk about businesses in Columbus paying 7.8% or people in Cincinnati paying 7.4%. Instead, they’re leading legislators to believe that businesses in Cleveland are being taxed 34% more than they really are.

Even the wealthiest Ohioans only pay those rates on their 208,501st dollar. In reality, the top 1% of Ohio earners pay 5.2% in income taxes, which is slightly higher than neighboring states.

Effective income tax rates, top 1%

What’s more, effective income tax rates are much lower for most Ohioans. Upper middle-income Ohioans pay lower income taxes than in neighboring states:

Effective income tax rates, fourth quintile

The Department of Taxation wrapped up by giving charts3 from ALEC’s Rich State, Poor State showing that oil-rich states don’t have income tax. They claimed that it showed income taxes reduce growth.

That was the entirety of his presentation. That is the only evidence supporting the GOP’s tax hike on seniors, women, and low-income families.

In all honesty, it was a very depressing hearing because the Republican legislators refused to challenge the Kasich administration on these assertions, even after it was pointed out to them that these figures are misleading.

What’s really disappointing is that the Department of Taxation has all the data it needs to study the 20-year growth patterns of each income tax district. It would be very easy to, say, compare business growth in Sharonville, with its 1.5% tax rate, to that in Glendale (its neighbor, with no income tax).

It may well be the case that, within a metro area, municipal income tax is a strong determinant of long-term business development. It may also be the case that out-of-state venture capital constitutes a larger share of the economy in states with lower top marginal tax rates.

Unfortunately, the Ohio Department of Taxation isn’t telling us that; they’re showing us misleading statistics and saying that they reflect those statements. If you’d like to testify at either of the last two meetings, here are the dates:

  • September 3 in Bowling Green
  • September 12 in North Ridgeville


1 And guess what? Oberlin has higher per capita incomes, higher home values, and less outmigration than the median Ohio county. The unemployment rate in this communist hellhole is 2.1%.

So, that kind of undermines the whole “income taxes destroy communities” argument.

2 Actually, there’s a good chance they have! That’s ZIP code data, and New Russia Township has a substantially higher median income than the city of Oberlin… which is, of course, 35% college students.

Which means that the wealthiest Oberliners are probably some perverted Marxist college professors who ought to be thrown in jail… but not overly taxed while they’re in jail!

3 Here’s where I turn the snark up to 11, because these charts are abysmal.

As I’ve said before, ALEC cherry-picked an oil trough to oil peak, because oil-producing states tend to have no income tax. So, here’s the first graph:

Bad graph

What this tells me is that the public sector grew enormously in the 9 states with no income tax! The economy grew 58.5%, but the public sector almost doubled! Those crazy tax-and-spend Texans and Alaskans grew a giant government.
Meanwhile, Ohio’s government spending barely outpaced economic growth. Those were times of responsible government.

And please, take note of the Magic Double Asterisk: the “low-tax” states are measured 2001-2010, while the “high-tax” states are 2000-2009. One is trough-to-recovery, the other is peak-to-trough. Of course growth from 2000 to 2009 is slow! The economy was booming in 2000 and plummeted in 2008; Bush was a terrible economic president!

But wait, it gets better! Keep in mind that you paid for this.

bad graphHere we have job growth, brought to you by manly job creators.

But job growth really only matters as a function of the labor market. Here we see that the “low tax” states added 5.36% to their employed population, and apparently added 8.29% to their unemployed population.

Or does this mean that they have a lot more kids in “low tax” states? That would be strange, because kids require a lot of consumer goods, and sales and property taxes are really high in Texas.

Seriously, why am I supposed to want to be like the blue bar? That’s a much worse labor market than the red bar.

But hey, at least they’re crediting ALEC directly. It makes blogging a lot easier.