How Ohio voters influence the amount of taxes paid to their local community

When voters go to the polls to choose their legislative representatives, they also indirectly determine state policy on how taxpayers’ money is spent.

Columbus lawmakers are weighing how much of the money collected by the state should go directly to local governments. It’s a system that’s been in place since statewide taxation began with the state sales tax during the Great Depression. It then expanded in the 1970s when the statewide income tax was introduced.

But over the past two decades, the state has begun to reduce the portion of its collections that goes directly to local governments. He also reduced the amount of income tax he collected from Ohio’s wealthiest residents, cut some corporate taxes, and eliminated the estate tax.

These cuts have hit some local governments pretty hard, and many are scrambling to pay for services once covered by state taxes.

“We lost millions and millions of dollars,” said Mauro Cantalamessa, a Democratic commissioner for Trumbull County who took office in 2014, around the time the effects of revenue-sharing cuts were introduced. gradually.

He said while the state has provided some replacement payment relief, cuts have been difficult.

“It was a boost for a lot of local governments that didn’t have to go to their constituents and constituents and say, ‘Look, we need X dollars,’ because, you know, we can’t no, we can’t afford to keep the prison open, or we can’t afford to, you know, run the courts or whatever these essential services that we have to provide,” Cantalamessa said.

Zach Schiller of Policy Matters Ohio said the share of state taxes that goes to local governments is half of what it once was.

The state has gone from sharing 4.2% of revenues via the local authorities fund in 2005 to 1.66% today.

State income tax has been cut nearly in half over the past 17 years – collections have fallen by about $7 billion a year – and other taxes have been reduced, eliminated or redirected into state coffers instead of local governments.

“The result is that local governments in Ohio are losing $1 billion a year in revenue they once received,” Schiller said.

The revenue-sharing percentage should be reduced to 3.68%, the percentage shared in 2008, said Jon Honeck, senior policy analyst for the County Commissioners Association of Ohio.

Honeck said new Internet sales tax collections in 2019 helped counties weather the cuts, but much of Ohio’s economy is shifting to the service sector.

And, “overall, most of the service sector economy is outside of sales tax,” he said.

Heidi Fought, executive director of the Ohio Township Association, said townships only received “chunks” of money through the fund. With most other sources of revenue earmarked for specific uses, this can leave townships short-sighted, she said.

“It is money that these entities can use for all general services. It’s not for very specific things like road funding, firefighters or police,” she said. “He provides general services, you know, if they need to, you know, fix a broken bathroom or fix baseball fields. They just don’t have these more flexible incomes anymore, like they used to, and, and it’s all due to, you know, the state, you know, essentially disowning their, their sharing of, funds with local governments.

And the policies run counter to local governments that supported the creation of the taxes, she said.

“The state wouldn’t collect these taxes without the help of local governments trying to get it passed in the 1930s,” Fought said. “This local government fund was supposed to be a revenue sharing between the state and the counties, townships and municipalities, this revenue sharing was supposed to be based on the growth that Ohio would see in taxes.”

The changes forced some communities and schools to raise local taxes in response, shifting the burden and adding new sales taxes, property taxes, and local income taxes. Schiller said that creates disparities between available services from county to county and can leave some communities, and the state as a whole, behind.

“We have a lot of services that are more dependent on local taxation and local resources than many other states. So you find that when you look at a whole range of services, Ohio has much less state support than other states. And that’s true for everything from public transit to children’s services,” Schiller said.

These policies generally benefit businesses and high earners, i.e. people earning more than $500,000 a year. By reducing a progressive tax like income tax, it forced the state to shift its reliance on more regressive taxes like money collected from sales. It hits low-income people harder than income tax, because income tax is tied to earnings.

“We have cut the most progressive taxes, and therefore our tax system falls more on those who earn less – low-income and lower-middle income people, or you know, low-income people. People in the bottom 20% of the income distribution pay almost twice as much as people in the top 1% and earn on average more than half a million dollars a year,” Schiller said.

Greg Lawson of the conservative Buckeye Institute said cutting taxes in the state could work, but only with the right “mosaic” of other policies.

Right now the state is underperforming compared to other states, but part of that has to do with the changing industry in the state.

But, Lawson said, taxing at all these different levels creates a less predictable patchwork of local taxes for citizens and businesses.

“And so what you get is an overlay effect, or even better, by analogy, it’s the frog in the pot of water where the temperature keeps rising. And the frog doesn’t surrender. never really realize it’s boiling until all of a sudden it’s boiled,” Lawson said.

If lawmakers want to give people certainty, he said, they should strive to create the right combination of taxation to make it more predictable. They should also stop shrinking the tax base with new tax loopholes and tax breaks, Lawson added.

A slew of tax breaks force paying people or businesses to pay more, he said.

“When you give someone a tax break, what you’re basically saying is that my tax system sucks. It’s expensive and it’s difficult. So I’m going to give you a special dispensation, a special break,” Lawson said.

Honeck agrees.

“We always believe that the best sales tax is as broad as possible. And that allows rates, rates to stay low, because of your broad base,” he said.

Voters should be watching lawmakers closely when it comes to the choices they make about distributing and collecting revenue, Honeck said.

“Voters should be asking lawmakers, ‘Are you going to support the county government? What do you think of supporting the defense of the indigent, of helping the counties to pay their prison costs? Will you support our county engineers who are responsible for maintaining and repairing hundreds of miles of county roads, especially in some rural counties,” Honeck said.

Wendy Patton, a professor at Kent State University, said it’s important to look closely at the candidates in the race when making those decisions.

It might not be as eye-catching as checking out a candidate’s Twitter account, but voters should look for candidates who share their values ​​on how tax revenue should be shared with local governments, how which essential services should be funded and how they think the tax burden should be met.

“By deciding how we prioritize our use of all these different streams of funds, it shows our values, it shows the values ​​of our legislators, and it’s up to voters, citizens to watch that closely…C That’s why we need to do our job and be thoughtful and careful to understand who they are, what they’re voting for and what we want,” Patton said.

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Julio V. Miller