NCPA - National Center for Policy Analysis


December 11, 2008

Thirty years ago, Ohio ranked 45th in the Tax Foundation's annual ranking of state and local tax burdens. That means Ohioans paid the fifth lowest taxes in the country.  Today, though, Ohio ranks seventh on that list.  It rates worse than any of its neighbors -- in most cases, much worse.  And between 1970 and 2006, Ohio's tax burden increased more than that of any other state.  Ohio's economic policy in general stacks up poorly, says J.H. Huebert, a Columbus attorney and a fellow at the Buckeye Institute.

Earlier this year, the Pacific Research Institute published a study of economic freedom in the states, considering such factors as taxation, regulation, government size, and government spending: 

  • Ohio ranked among the least economically free states -- 44th of 50.
  • Ohio would have ranked even lower but for its outstanding judicial climate, which the study ranked second in the nation.

With its heavy taxation and other government-imposed economic burdens, it's no wonder Ohio's economy also ranks among the lowest in job creation, new investment, and business climate, says Huebert:

  • Ohio University economist Richard Vedder has estimated that for every 1-percent increase in a state's income tax, there is a 3.5-percent decrease in economic growth.
  • Thus, Ohio's income tax, with a top rate of over 6 percent, puts it at a severe competitive disadvantage, especially against those states with no income tax.

Professor Vedder's research also shows that Americans are fleeing high-tax states like Ohio:

  • From April 2000 to June 2006, there was a net migration of 2.3 million people from income-tax states to no-income-tax states.
  • A recent study by economist Eric Fisher for the Buckeye Institute concluded that if Ohio had eliminated its income tax in 1990, its population growth would have been the 24th fastest in the nation instead of 44th.

Businesses are understandably even more ready than individuals to cross state or national borders to avoid taxes and regulation.  Ohio's economy has no doubt paid dearly for that as well.

The only way out of this downward spiral is to make drastic changes, including deep cuts in both taxes and spending, says Huebert.

Source: J.H. Huebert, "Ohio taxes and spends too much," Pacific Research Institute, December 9, 2008.


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