Friday, March 4, 2011

Attention Wisconsin! Tax Cuts to Corporations Don't Produce Jobs; the Comparison between Ohio, Wisconsin, and Minnesota

Few men have virtue to withstand the highest bidder.
- George Washington
courtesy of quote of the day,

Ohio is attempting to enact the same kinds of union busting legislation as Wisconsin.

As Wisconsin intends to do, if Governor Walker gets his way, Ohio has already done away with corporate income taxes, and has lower taxes in other categories, like property taxes and sales tax, than the national average.  This presents the question, are the tax cuts really about job creation, or are they just continuing and expanding the income gap between the wealthiest 1%, and the other 99%, with a side-order of union busting to further increase that gap between the very few haves, and the increasingly have-nots and have-less?

Yet their unemployment is HIGHER than the national average, and has been in spite of all the give-aways and the freebies for corporations in Ohio. Low Corporate Taxes are a factor in business relocation, but not the only - or even the most important - factor in job creation. If this was a mechanism for producing jobs, Ohio wouldn't have these comparative statistics:

                                Unemployment Rates         
                                             Dec. '10 
Ohio                                          9.5%

Ohio not seasonally adjusted        9.2%

U.S.                                           9.4%

U.S. not seasonally adjusted         9.1%
While Wisconsin had an unemployment rate of 7.5%, and Minnesota 7.0% respectively for the same time period.
From the Tax Foundation, on Ohio:
Tax Freedom Day Arrives on April 8 in Ohio In 2010, Ohio taxpayers work until April 8 (ranked 23rd highest nationally) to pay their total tax bill, the day before national Tax Freedom Day (April 9).
Tax Freedom Day in Wisconsin is April 12, ranking 13th nationally; in Minnesota, it is April 13, ranking 8th.
Ohio's State and Local Tax Burden Below National Average Ohio's state and local tax burden is currently estimated at 9.7% of income (18th nationally), just below the national average of 9.8%. Compared to the 1977 data, Ohio had a tax burden of 8.9% (40th nationally), increasing 0.8% overall. Currently Ohio's taxpayers pay $3,652 per capita in state and local taxes.
Wisconsin ranked 4th, Minnesota ranked 7th, in comparison.
Ohio ranks 46th in the Tax Foundation's State Business Tax Climate Index.
The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.

50-State Comparison of Business Tax Climates (data only)2011 State Business Tax Climate Index, Eighth Edition (full study)
Wisconsin ranked 43rd, Minnesota ranked 40th.

Ohio's Corporate Income Tax System
A gross receipts-style tax, the Commercial Activity Tax (CAT) was implemented in 2005. It was phased in through 2010, while the Corporate Franchise Tax (Ohio's corporate income tax) was phased out. Starting April 1, 2009 the CAT rate is 0.26%. For tax year 2009 companies owe 20% of Corporate Franchise Tax liability. In 2008, state-level corporate tax collections (excluding local taxes) were $65, which ranked 45th highest nationally.
Wisconsin's corporate income tax, in comparison is 7.9%, Minnesota 9.8%.  Remember those unemployment rates?
Ohio's Sales and Excise Taxes
Ohio's state sales tax rate stands at 5.5%, which is below the national median of 5.85%.
Of the 45 states and the District of Columbia that impose a sales tax, six other states have a tax rate higher than Minnesota at 6.875%. The states are:

California 8.25%   Mississippi 7.0%  Rhode Island 7.0%   Tennessee 7.0%  Indiana 7.0%  New Jersey 7.0%
Wisconsin has a 5% sales tax, with many counties charging additional sales tax on top of the state rate.

Minnesota and Wisconsin have lower unemployment rates than Ohio, regardless of taxation, be it corporate taxation or sales taxation or individual taxation or property taxation.  Clearly, other factors have a significant - more significant - influence on jobs and unemployment than these tax policies.  Yet Walker and the Republicans in Wisconsin, and the Republicans in Minnesota, want to shift the tax burden to middle class americans, giving a comparative pass to the wealthy and to corporations - in the name of job creation and economic growth.  It is a farce, it is a fallacy.

Ohio Property Taxes: Middle of the Pack
Ohio is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Ohio's localities collected $1,095.99 per capita in property taxes in fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. The state government collected $3.02 per capita in property taxes in FY2006, bringing the total property taxes collected in Ohio to $1,099.01 per capita, ranking 24th highest nationally.

Federal Tax Burdens and Expenditures: Ohio is a Beneficiary State
Ohio taxpayers benefit about equally compared to the average state from federal spending. Per dollar of Federal tax collected in 2005, Ohio citizens received approximately $1.05 in the way of federal spending. This ranks Ohio 31st highest nationally. This represents a slight rise from 1995 when Ohio received $0.97 per dollar of taxes in federal spending, ranking it 32nd nationally. Neighboring states and the amount of federal money received per dollar of federal taxes collected were: Indiana ($1.05), Pennsylvania ($1.07), West Virginia ($1.76), Kentucky ($1.51) and Michigan ($0.92).
What these sweet deal tax cuts for the corporations and for the wealthy few do is to decrease, in some cases substantially, the amount of revenue at the state and federal level.  That creates in some cases a deficit, and in all cases, an amount of debt or deficit in the respective budgets. Republicans and Tea Partiers are seeking to make up that lack of funds from the wealthy individuals and from corporations by shifting that tax burden onto the shoulders of those who earn far less, even though the wealthy individuals and corporations are benefiting from the business climate and government services provided in those states.

The notion that the policies being pursue in Wisconsin, Ohio, and other states will grow the economy is specious; it is 'Republican Math' where the answers are based on ideology, not on the numbers adding up.

In reference to the
Bush Tax Policies, which these Republican tax policies mimic:
House Minority Leader Richard Gephardt said the middle class will not benefit enough from the tax cut and the wealthy will reap unfairly high benefits. Senate Majority Leader Tom Daschle argued that the tax cut is too large, too generous to the rich and too expensive. Wallace, Kelly (June 7, 2001). "$1.35 trillion tax cut becomes law". CNN InsidePolitics archives. Retrieved December 29, 2010.
According to economists Emmanuel Saez and Thomas Piketty, who reviewed income tax returns for all income groups since 1917, found that in 2005, the top 1% received its largest share of gross income since 1928."Johnston, D. C. (March 29, 2007). Income Gap is Widening, Data Shows. The New York Times.". 2007-03-29. Retrieved 2007-11-10.
Economist John Weeks asserts that increased income inequality in the U.S., one of only four high-income OECD countries to experience a significant increase in inequality, is largely the result of a less progressive taxation structure, the weakening strength of labor unions, which has resulted in "a growing imbalance in the economic and political power of capital and labor."  Weeks, J. (2007). Inequality Trends in Some Developed OECD Countries. In J. K.S. & J. Baudot (Ed.), Flat World, Big Gaps: Economic Liberalization, Globalization, Poverty & Inequality (pp. 159-175). New York: ZED Books (published in association with the United Nations). (my emphasis added - DG)
The George W. Bush tax policies were disastrous for this country in the last decade; this country, state by state, can afford them even LESS now when our economy is anemic rather than robust.  This is nothing less than class warfare by the Republicans and Tea Partiers against the overwhelming majority of the citizens of the United States on behalf of the wealthy few.  Our economic problems will not be solved with measures that penalize unions, or tax the middle and even less affluent of our citizens.  The solution is not simply to gut spending which benefits largely democratic constituencies while providing subsidies and tax give-aways to the wealthy and to corporations.  These proposed conservative solutions are really just larger conservative-generated problems for all of us.

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