Ohio 2020 Tax Policy Commission October 31, 2016 Gavin DeVore Leonard, One Ohio Now My name is Gavin DeVore Leonard. I am the State Director of One Ohio Now, a coalition of 103 partner organizations – health and human service organizations, labor unions, and other advocacy groups – whose members total over 1 million Ohioans. One Ohio Now advocates on state budget and tax policy issues with a focus on ensuring a fair and adequate revenue system to meet Ohio’s needs. I am here today to share our perspective on the Ohio 2020 Tax Policy Study Commission’s areas of interest as set out in HB 64, with a particular focus on “the state’s tax structure and policies… on how to maximize Ohio’s competitiveness by the year 2020.” I will also speak briefly to our positions on the other questions before the Commission, including the concept of a “flat tax,” reforming Ohio’s severance tax, and the review of Ohio’s tax credits. My remarks are focused on what I believe to be the overarching question guiding all of the Commission’s work: what kind of revenue system should be in place in Ohio to match the state’s needs? There is generally broad agreement that our revenue system should follow basic tax policy principles. Everyone wants the system to be as simple as possible. There is a desire for neutrality so that we are not systematically favoring one kind of economic activity over another and picking winners and losers in the process. And at it’s core, the system should be adequate so that the state can maintain the basics so all Ohioans have the opportunity for a great quality of life. State spending on education, infrastructure, and more provides a foundation for a healthy economy. Prior testimony before this Commission has focused primarily on individual pieces of the revenue system – on the income tax, severance tax, hotel intermediaries, satellite TV, tobacco tax, tax expenditures, and more. I would like to focus on the bigger picture – what is our goal when all of these specific tax policies add up? What does the state need revenue for? Once we’ve established this purpose, then how much revenue does the state need? Finally, what sources of revenue will help us meet Ohio’s needs? These questions are at the root of this Commission’s efforts and are why we believe that the basic principle of adequacy should undergird your efforts. While the state works in concert with federal and local governments, there are certain responsibilities that have typically been expected of the state. While other entities, including the private sector, are clearly instrumental in building strong communities, the state’s role is pivotal. The largest needs for state revenues include education, health care, human services, corrections, transportation, and capital needs, in addition to many other areas that are relatively small in the context of the full budget but can be very important to the individuals and entities that receive financial support. INVESTING IN OHIO’S FUTURE.
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We need revenue for these major areas of investment in Ohio for clear reasons. We want an educated population because we know this leads to a healthy economy and stronger wages for everyone. We want Ohioans to be healthy, to be safe, to be able to travel and move goods easily, and to have a high quality of life in our communities. Earlier this year, we released a report (The State of Ohio 2016, an addendum to this testimony) that attempted to assess the depth of our needs in Ohio in a holistic way, and to therefore draw conclusions about our revenue needs to match. By looking at metrics across the categories of Health and Home, Education, and Employment and Economy, we sought to share an accurate portrayal of what is happening in Ohio and how we compare to the country. Compiling the data across these broad categories, we found many areas of significant need that we believe impact the question of how much revenue is needed to ensure Ohioans are educated, safe, healthy, and more. For example, at our report’s release, Ohio ranked: • • • • •
34th in college tuition, 29th in high school graduation, 36th in poverty 47th in hunger, and 45th in the country for infant mortality,
In many of these areas we saw even greater concerns and notable disparities when looking at the outcomes for children, minorities, and other groups of Ohioans. Our report makes it clear: we have serious needs in Ohio. To address these needs, we believe that additional state investment will be necessary. Taking one example, Ohio’s college affordability is clearly a major concern. 2/3 of Ohio college graduates are leaving school with debt that averages $29,300. This puts Ohio at a competitive disadvantage to other states. Only 10 states have a higher percentage of students graduating with debt. While a college education is not the only route to a solid income, no one argues that it is a very important piece of the puzzle for Ohioans’ long-term success in the economy – individuals need education and businesses need an educated workforce. In fact, by 2020, more than 60% of jobs in Ohio will require an associate’s degree or higher. In order to be competitive, Ohio will need to ensure higher education is attainable for everyone. Yet, Ohio ranked 34th in tuition costs for a full time student at one of Ohio’s public colleges or universities. While tuition and State Share of Instruction combine to finance the vast majority of INVESTING IN OHIO’S FUTURE.
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higher education, it is widely agreed that tuition has simply become too expensive. Therefore, it is hard to imagine a college education system in Ohio that does not more heavily rely on state support. Reducing administrative bloat and other cost cutting can certainly help, but a revenue system to match our higher education needs must be a consideration. Investing in higher education is simply one of many areas of clear need in our state. Other examples are not hard to find. The need for massive investment in Ohio’s infrastructure is undoubtedly great – for roads, bridges, water treatment, internet access, and more. Every legislator knows about the infrastructure needs in their district, but the collective, statewide infrastructure backlog is rarely discussed. High quality pre-k investments show an economic return of $8 for every $1 spent, but too many Ohio kids don’t get access to high quality programs. Many local governments and public safety services are seriously struggling. And our poverty rate remains stubbornly high, especially for kids, as 1/3rd of Ohio families earn less than $40,000 per year. All of these areas are calling out for investment – investment that will require a revenue system to match so that Ohio can be competitive on behalf of all Ohioans. Assuming that we will need additional investment, and revenue, then how much? There is no blanket answer. We’ll need to look at each area closely and make tough decisions. Feeding America’s report calls for $911 million to end hunger in Ohio. Every child could likely have access to high quality preschool with hundreds of millions of dollars. We could make a serious dent in college affordability – lowering the cost of college education by 20% - with approximately $600 million per year. In other areas, like children’s services for those impacted by the opiate epidemic, relatively smaller investments of tens of millions of dollars could make a huge impact. To meet the principle of adequacy and ensure we can meet our state’s many needs, the Commission will want to consider revenue sources. The major sources of revenue for Ohio are income and sales taxes, and the specific question of “how to transition Ohio’s personal income tax to a flat tax of three and one-half per cent or three and three-quarters per cent beginning in tax year 2018” is in front of this Commission. We believe in a revenue system that is both adequate and fair. Ohio’s annual sales tax revenue is now greater than Ohio’s income tax revenue and the proposed transition would further weaken a revenue source that we believe should be strengthened. Therefore, we do not support moving to a “flat tax.” Lower
income Ohioans already pay a greater share of their income toward state and local taxes than more affluent Ohioans, and a “flat tax” would further exacerbate this discrepancy. Instead, we encourage the Commission to consider how to make our revenue system more equitable while becoming more adequate as well.
One way to move in the right direction would be to increase Ohio’s severance tax. This Commission was tasked with considering “how to reform Ohio’s severance tax in a way that maximizes competitiveness and enhances the general welfare of the state.” In far too many INVESTING IN OHIO’S FUTURE.
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ways, Ohio’s revenue system has not kept up with the times, but increasing the severance tax is one common sense improvement so that Ohio can better meet it’s needs and spread prosperity to everyone, particularly in the communities where oil and gas drilling activity is greatest. Another Commission goal, to “review and evaluate every credit against a tax levied by the state and authorized in the Revised Code,” could lead to common ground for improving Ohio’s revenue system. While there are many practical credits, analysis of our nearly $9 billion in annual exemptions leads us to believe at least hundreds of millions of dollars could be returned to the state for investment to solve pressing problems like college affordability. Furthermore, tax credit review will likely lead to increased simplicity and neutrality in the tax code, meeting two more basic principles. We would encourage the General Assembly to reach agreement on House Bill 9, establishing a permanent process for tax expenditure review. On the final Commission task to review “how to make the tax credit authorized in section 149.311 of the Revised Code more efficient and effective, including converting it to a refundable tax credit or grant program,” we do not have a position. In summary, we appreciate the opportunity to share our perspective with you about how to make Ohio a competitive state where all Ohioans can prosper. We believe that an adequate revenue system is needed to address major needs and we would gladly participate in any further dialogue about how to reach our common goals. I’d be happy to answer any questions you may have.
COALITION PARTNERS: Action Ohio Coalition for Battered Women wAFSCME Council 8 wAIR Inc.wAll Aboard OhiowAmerica Votes OhiowASIA, Inc. wCenter for Working Class Studiesw Children’s Defense Fund - OhiowCleveland Jobs with JusticewCleveland Tenants OrganizationwClintonville-Beechwold Community Resource CenterwClintonville for ChangewChurch for All PeoplewCoalition on Homelessness & Housing in OhiowColumbus Metropolitan Area Church CouncilwCommon CausewCommunications Workers of AmericawColumbus Jobs with JusticewCommunity Partners for Affordable Accessible HealthcarewCommunity Action Patrnership of Greater DaytonwCorp. for Ohio Appalachian DevelopmentwEcumenical Communities for a Compassionate OhiowEducational Service Center of Lake Erie WestwEmpowering and Strengthening Ohio’s PeoplewThe Empowerment CenterwEnvironmental Health WatchwEquality OhiowFindlay Hope House for the HomelesswForging Responsible YouthwGeorgetown Federation of TeacherswGreater Cincinnati Homeless CoalitionwGreater Hilltop Area Shalom ZonewHavar, Inc.wHispanic Alliance, Inc.wThe Hunger Network of OhiowInnovation OhiowIUE-CWAwLegal Aid of Southwest OhiowLiveCLEVELAND!wLutheran Metropolitan MinistrywMahoning Valle Organizing CollaborativewNational Assoc. of Social Workers-OhiowNeighborhood SolutionswNortheast Ohio Alliance for Hope (NOAH)wNortheast Ohio Coalition for the HomelesswNorthern Ohioans for Budget and Legislation EqualitywOhio AFL-CIOwOhio Alliance for Retired AmericanswOhio Assoc. of Community Action Agenciesw Ohio Assoc. of Free ClinicswOhio Assoc. of Professional Fire FighterswOhio Assoc. of School Business OfficialswOhio Community Development CorporationwOhio Civil Service Employees AssociationwOhio Coalition for Equity & Adequacy of School FundingwOhio Communities UnitedwOhio Conference of the American Association of University ProfessorswOhio Conference of the NAACPwOhio Conference on Fair TradewOhio Congress of Parents and TeacherswOhio Domestic Violence NetworkwOhio Education AssociationwOhio Farmers UnionwOhio Federation of TeacherswOhio NOWwOhio Organizing CollaborativewOhio Partners for Affordable EnergywOhio Poverty Law CenterwOhio Public Transit AssociationwOhio Retired Teachers AssociationwOhio School Boards AssociationwOhio Student AssociationwOhio Voicew Ohio Voter FundwOhio VoteswOhio Youth VoiceswOrganize! OhiowOver-the-Rhine Community HousingwPeople’s Empowerment CoalitionwPlanned Parenthood Affiliates of OhiowPolicy Matters OhiowProgressOhiowPutting People First CoalitionwRahab’s HideawaywSEIU District 1199wSEIU District 1wTapestrywToledo Jobs with JusticewUHCAN OhiowUFCW 1059wUFCW 75wWe are the UninsuredwWe Believe OhiowWorking AmericawWright State University AAUPwYouth Empowerment Program
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