Editorial: Area?s representatives back income tax phaseout

The bill isn’t likely to go very far in the near future, as even one of its sponsors acknowledges. Nonetheless, state Rep. John Adams, R-Sidney, deserves credit for his part in introducing an attempt to revolutionize Ohio’s tax code. The methodology — eliminating the state income tax as a way to increase tax revenue — will strike some as counterintuitive, but it is working elsewhere.Adams and state Rep. Thom Collier, R-Mount Vernon, on Monday introduced House Bill 534 to phase out Ohio’s progressive income tax over 10 years. Seventeen House Republicans — including four of this region’s remaining five — co-sponsored the bill, and the Columbus-based, free-market Buckeye Institute supports the idea. Everyone in government seems to agree Ohio must do something to jump start this state’s sluggish economy. Unemployment is higher here than the national average. Business start-ups aren’t coming to Ohio as rapidly as in other states. More people are leaving Ohio than are moving in.Gov. Ted Strickland has proposed spending more on education and job training, but improving education and ignoring the effects of Ohio’s punishing income tax seems the proper recipe only for continuing to train other states’ workers. Ohio should take steps to keep our best and brightest — which often means our most successful — people here at home.Adams relies on state tax ratings from the American Legislative Exchange Council (http://www.alec.org). Like so many others, that organization ranks Ohio near the bottom. Only three states — Rhode Island, New York and Vermont — have worse tax structures for attracting new businesses and new people. From 1997 to 2007, only four states saw a greater migration loss than Ohio.One of the states that has done the best over that period was Texas. The Wall Street Journal pointed this out on the eve of the March 4 primaries in Ohio and Texas. Over the decade in question, Texas — which has no personal income tax — added 1.6 million jobs, compared to the 10,400 jobs Ohio lost during the same time. Texas welcomed 667,000 people from other states while Ohio lost 362,000. Per capita income rose 55 percent from 1996 to 2006 in Texas, but only 43 percent in Ohio.Part of the problem in Ohio is that, as one becomes more successful, that person loses a greater percentage of pay to state government. Ohio’s top rate of 8.8 percent is more lenient than only five other states’ top personal income tax, according to the American Legislative Exchange Council. Combine that with the nation’s third-hardest top marginal corporate income tax rate and middle-of-the-pack sales and property tax rates, and you see why someone starting a business will look elsewhere.Strickland and Lt. Gov. Lee Fisher answered The Wall Street Journal by pointing out that the Federation of Tax Administrators this year found Ohio has the 38-highest (or 13th from best) state tax burden. That’s great, but the burden is shifting to the local level — school funding, which the state constitution mandates, being the best example. Wouldn’t we all rather Ohio added the jobs than get good marks from an association of state bureaucrats?Eliminating Ohio’s income tax, while certainly the best option, isn’t the only one available. New Mexico has flattened its top rate and is seeing success, Adams reports. That state has a budget surplus of half a billion dollars and is seeing faster tax revenue growth than any other state. As the American Legislative Exchange Council noted in its study, more people paying fewer taxes works better than forcing fewer people to pay more — all the more true when you consider that those who pay the most can relocate much easier than most other people.Don’t credit the weather. Only New York saw more migration out of state than California did from 1997 to 2007. Guess which sunny West Coast state harshly punishes success with its tax code.Both Adams and Rep. Matt Huffman, R-Lima, one of the tax-elimination bill’s co-sponsors, suggest some kind of consumption tax could replace the income tax. Huffman went a step further, saying lawmakers should look at all state spending to cut the unnecessary.State lawmakers from both parties should take seriously House Bill 534 and any other serious ideas to make Ohio more competitive. Even if lawmakers can’t make this change this year, the Republicans ought to position it centrally in the 2010 gubernatorial race.