Editorial: Ohio income tax bill fiscally sound

It might seem counterintuitive to some to eliminate the state's personal income tax at a time when the economy appears to be in a nosedive, but that is exactly what the state of Ohio needs.

In fact, one local representative, freshman state Rep. John Adams, R-Sidney, has proposed phasing out the income tax during the next 10 years. Kudos, also, to local state representatives who are co-sponsoring Adams' bill. That includes Rep. Matt Huffman, R-Lima, Lynn Wachtmann, R-Napoleon, and Cliff Hite, R-Findlay. In fact, the only local representative not co-sponsoring this necessary and important bill is Rep. James Zehringer, R-Fort Recovery.

Unfortunately, his bill, House Bill 534, is likely to die in the Ways and Means Committee unless something drastic happens during the General Assembly's lame-duck session in November. If it dies, we urge Adams, or some other representative, to reintroduce the bill when the 128th General Assembly convenes next year.

Ohio is one of the most heavily taxed states in the Republic. It is also quickly losing political power because its population growth is slower than most other states. Indeed, the state has lost three congressional seats - and three votes in the Electoral College - in the last 25 years.

During that same period, Ohio's top marginal state income tax rate grew to 7 percent, an extremely high number, especially when compared to other states. In fact, Ohio's total state tax burden, which includes, income tax, sales tax, and taxes on beer, gas and cigarettes, made Ohio the fifth most taxed state in the union.

Additionally, the state's gross state product per capita has declined when compared to other states. Ohio was ranked 25th in 1990 but had fallen to 28th by 2005. That means Ohio has a lower standard of living than many other states.

That this decline in relative population and standard of living corresponds with a steep growth in the state's tax rate is no coincidence. It is also no coincidence that the fastest-growing states have a low tax burden.

High tax rates suppress economic development, provide a strong disincentive to work and encourage migration to other states. Ohio is proof of this truism. In fact, the two states with the fastest growing economies are South Dakota and Oregon. South Dakota has no income tax and Oregon has dramatically decreased its taxes during the last 15 years.

In an August study for the Buckeye Institute, Eric N. Fisher, an economist with California Polytechnic State University, predicted that Ohio could conservatively increase its economic growth from a paltry 2.1 percent per year to a healthy 3.1 percent per year.

Abolishing the income tax is not an impossibility. Several states, including large states such as Florida, Washington, Nevada, Texas, Alaska and South Dakota, have no income tax at all. If those states can remain fiscally sound without taxing the hard work of its residents, then certainly Ohio can do so as well.

With the abolition of the state income tax, the state will still have the constitutional requirement of creating a balanced budget.

This should not be that difficult. As the income tax is phased out and the Commercial Activity Tax is phased in, the economy and the population of the state will begin to increase. A faster-growing economy and a faster-growing population will certainly increase the amount of revenue the state raises through its other taxes, including the sales tax.

If the state keeps its spending growth to its recent trend of less than 2.4 percent per year, Fisher's data indicate there would be no loss of revenue from the abolition of the income tax. In fact, it could mean the state would actually find itself with more money, depending on the rate of economic growth.

While a much shorter period would be more desirable, Adams' bill deserves serious consideration. It is the fiscally responsible thing to do.