A BILL before the General Assembly would eliminate Ohio's personal income tax over the next decade, with no source of replacement revenue. Since education spending accounts for about 40 percent of the state's general revenue fund, local school districts likely would face major cuts in state aid.
As leaders of organizations that represent Ohio's public boards of education, school superintendents, treasurers and business managers, and other officials, we are very concerned about that prospect.
About half of school funding comes from the state. The Ohio Legislative Service Commission estimates that elimination of the income tax would cause revenue cuts in school districts of as much as 38 percent. This likely would mean big reductions in already strained school budgets and a significant shift in the tax burden for schools to local residential property taxpayers.
If the tax measure were fully in place during the next school year, Toledo Public Schools would lose $64 million in state aid. This year's TPS budget is about $290 million. Replacing the permanent loss of the income tax with property taxes would require Toledo residents to pay about $1.60 in property taxes for every dollar they pay now.
Some school districts rely more heavily on state funding than others. Those that have lower property values get a higher than average percentage of their funding from the state. They do not have the capacity to raise replacement dollars locally.
The tax proposal is bad public policy for other reasons. Ohio taxes its residents in a balanced way. A new report released by the Education Tax Policy Institute notes that the state's three largest sources of revenue are the sales tax, the personal income tax, and the cigarette tax. Such a balance, the report says, allows the tax burden to be spread over a broad base and provides stability to the general revenue fund.
Poorer citizens pay a higher percentage of their income than wealthier residents in regressive sales and cigarette taxes. The income tax is more proportional to ability to pay. If the personal income tax were eliminated, Ohio's reliance on other taxes likely would increase.
Elimination of the income tax would benefit wealthier taxpayers much more than their lower-wealth counterparts. According to the report: "The two-thirds of Ohio taxpayers with the lowest income receive 15 percent of the benefits of income tax repeal. In contrast, fewer than 2 percent of Ohio taxpayers receive 31 percent of the benefit of income tax repeal.
"Looked at another way, less than 10 percent of Ohio taxpayers earn $100,000 or more. These taxpayers would obtain more than half of the benefit of [the] income tax repeal. Their tax savings would account for over 56 percent of the entire reduction."
Ohio ranks 25th among all states in the amount of state and local revenue per person, the report says. This is down from previous rankings, partly because Ohio enacted sweeping business tax reform in 2005. Repeal of the income tax would lower Ohio to 50th among the states in state revenue per person.
Ohio cannot afford to shift from a balanced, reliable tax structure to a more-regressive system that is insufficient to provide vital government services. Funding for education, law enforcement, and infrastructure would become a much bigger burden for local governments and schools. They would have to rely even more on local taxpayers than they do now, and some communities simply could not handle the load.
Ohio's economic recovery will require more investment in education, not less. We strongly oppose the elimination of the personal income tax because of the devastating effect it would have on our state's system of public education.
Rick Lewis is executive director of the Ohio School Boards Association, Jerry Klenke is executive director of the Buckeye Association of School Administrators, and David Varda is executive director of the Ohio Association of School Business Officials.