Monday night Ohio Governor John Kasich delivered his state of the state speech.
He cribbed the biblical Reagan "city on a hill metaphor" to describe Ohio:
All of these things have helped Ohio move up to higher, more solid ground, and, if you look, the clouds are moving apart and the sun is beginning to shine, and we can get a glimpse of the summit ahead. We’ve got much further to go, but the success we’ve had gives us the confidence to climb higher. We’re not hopeless, we’re hopeful. We’re not wandering, we have direction. Let’s keep going.
As an Ohioan, I’d like to tell a different story.
It’s a story that appears in bits and pieces in city & school financial reports, in letters to the editor and editorials, in economic analyses, but the full story has largely hid from public sight because it’s not a single sensationalist event.
It’s not a story about a person or administration because you have to go back further than that to see the pattern.
You have to go back further than that to see how a state gets budgeted back to the stone age.
The pattern is simple but takes place over a long period of time: shift tax burden, create deficit, blame government, defund government, repeat.
And unfortunately, it’s a story that’s not just happening in Ohio, but at a national level and in many states across the nation because it’s being pushed by influential corporate groups like the American Legislative Exchange Council (ALEC).
The story begins in 2005 …
The Ohio General Assembly passed House Bill 66 promising to improve economic conditions for Ohioans.
H.B. 66 eliminated the corporate income tax and reduced state income taxes by 21%.
Governor Taft from his 2006 state of the state speech:
At this time last year we had a tax code that was mired in the distant past, punishing investment and ignoring innovation. We worked day and night to bring that code into the 21st Century. We cut the income tax. We junked the corporate franchise tax. We scrapped the inventory and equipment tax.
The promise was jobs and growth.
Impact of H.B. 66
Who benefited from the tax cuts? According to an editorial in the Toledo Blade:
Most Ohioans got little benefit from the tax overhaul. Middle-income Ohioans receive, on average, a refund of $182 a year. The income tax cuts most benefit the wealthy — Ohio’s top 1 percent typically get $10,000 a year in state tax relief — while services that low-wage earners especially rely on get cut.
Did H.B. 66 work? Did it create jobs?
In April 2013, Policy Matters Ohio looked at the data to see how Ohio was performing versus other states.
The report is not great.
From 2005 to 2013, we’ve had a 4.4% decline and have lost 238,000 jobs. Over the same period, despite the recession, the nation managed a 1.2% increase. Ohio missed out on pre-recession growth and has been slower to recover. Overall, Ohio ranked fourth-worst in the nation.
Zach Schiller testifying to the Ohio house in 2014:
In June 2005, income-tax rates were cut 21 percent and major business taxes were slashed. Whether one begins with the approval date, the beginning or end of the recession, or since the beginning of this administration in January 2011, the results have been the same: The Ohio job market underperformed the nation. Since June 2005, we have lost a greater share of our jobs than all but two other states, Rhode Island and Michigan. Since January 2011, Ohio private-sector employment growth has trailed behind the country’s, at 3.97 percent compared to the U.S. increase of 6.44 percent.
Nine years after the 2005 tax cuts, we trail the rest of the nation on growth and jobs. In the recent Gallup well-being index, Ohio ranked 46th out of 50 states in 2013.
The story doesn’t end with the 2005 tax cuts though. In 2010, Ohio elected a new governor and state legislature.
The 2010-11 “Jobs Budget”
The following chart shows the impact of his cuts to the Local Government Fund (LGF). The LGF funds are distributed to cities and municipalities throughout the state.