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Public media are made possible by PNC and the United Blac Fund of Greater Cleveland, Inc.. Hello and welcom to the City Club of Cleveland, where we are devoted to creating conversations of consequence that help democracy thrive.

It is Friday, September 20th.

I'm Karen Kasler, Statehouse bureau chief for Ohio Public Radio and Television.

And I'm moderating today's discussion as we head into the November election.

Tax policy is undoubtedly a top issue for many voters K-through-1 schools, higher education, local governments, libraries and more rely on taxation to raise adequate revenue to provide public services.

Tax policy is also being used as a tool to attract jobs, spur economic growth and promote entrepreneurship.

But what are we actually seein in Ohio and across the nation?

In 2017, the Trum administration signed into law what many cite as the biggest tax overhaul since the Tax Reform Act of 1986.

Just this year, Republican lawmaker introduced legislation in Ohio that would eliminate Ohio's income tax and repeal the commercial activities tax by 2030.

While such legislation is unlikely to pass in Ohio, especially right now, it opens up the debate for what constitutes effective and equitable taxation.

Joining me here to talk about the issue of taxation and the state of it and what it means for our communities and economy is Amy Hanauer.

She's the executive director of the Institute on Taxation and Economic Policy.

All the way from D.C.

Here we have Greg Lawson, researc fellow of the Buckeye Institute.

Jory Novotny, Executive Director of the Ohio Association of Food Banks, and Bayley Williams, tax policy researcher at Policy Matters, Ohio.

Thank you all for being here.

This is wonderful to see you all.

If you have a question fo our panelists, you can text it to 3305415794333330541579 for City Club staff.

We'll try to work it into the second half of the program.

Welcome again.

So I want to start.

Amy, you came the furthest.

So let's let's acknowledge that and star with kind of an overview here.

Federal taxe could potentially change again, that the Trump tax cuts will expire next year.

Can you review what actually is in that overhaul?

Yes.

So when the Trump administration in 2017 signed their tax overhaul, they they put in plac a tax plan that really rewarded corporations, that lowered the corporate tax rate and that really rewarded the wealthiest Americans.

And, you know, it has prove to be proven to be problematic.

We saw many corporations sort of lower their rate to zero after that go ove what they were paying to zero.

And we saw a big declin in what corporations were paying in corporate taxes over that period because it cost more than the threshold that was permitted.

They put in place some limits on that taxation, on those tax cuts and those they sort of targeted at on at blue states, at states tha had higher local local taxation.

And so that's the kind of state and local taxation cap issue that you hear about.

So it's and because because of that limit, they also made the individual tax cuts temporary.

So they made the corporate tax cuts permanent and they made the individual tax cuts temporary.

And it's those individual tax cuts that have to be renewed next year and that there is a big fight in Washington.

It's going to be the most consequential tax debate of the decade.

So do you want to weigh in on that at all?

Well, I think it's true.

It's going to be a very consequential tax debate in Washington.

Obviously, I think there's there's some reasons you don't want to see th individual rates in particular going up right now.

So I think we have to continue to talk about that.

I do think that there's a lot of interesting conversation.

Hopefully we'll get a dive into Ohio a little bit more on that nexus of of state, really federal, state and local taxation.

I think in Ohio in particular, it may even be more germane and some other states because we have a lot of local taxation which has an impact.

But we'll have to see what happens.

I suspect that that ultimately it won't whatever tax reform is done i Washington is not going to look the same as what was passed down 17.

There'll be elements that probably would be reauthorized maybe.

We'll see if they can agree on anything in Washington.

But I wouldn't necessarily assume that that it' going to look exactly the same, but exactly how that's going to work.

But I do want to point out on the corporate tax thing, the one thing that will keep in mind is the United States had a higher corporate tax rate than a lot of the OECD, the Organization of Economic Cooperation Development.

So basically, industrialized countries, Asia and Europe.

And we had a high rate relative to a lot of these other industrial nations, which put us at a at a competitive disadvantage.

So part of the argument for lowering those corporate tax rates is to make us be more competitive with European and Asian countries that way.

So we can talk about some of the other distributional aspects, but that was the motivation for it was we were high relative to other countries.

Now we're kind of in the middle of the pack, maybe a little bit below some, but still higher than others.

And some of this depends obviously, on who actually wins the election.

Vice President Harris has talked about a corporate tax hik from 24, going from 21% to 28%.

There's been some other ideas.

I believe the former President Trump has a plan, but certainly I would expect th Trump tax cuts to be extended.

But I want to talk about one thing that both candidates have talked about, and that is the impact of eliminating taxes on tips.

We've heard both candidates say that this would be a great idea.

And I'll start with you, Bailey.

What's the impact of that on not only governments but also on the people who actually are paying the taxes?

It's a great question.

I will start with the people who are paying the tax.

You're talking about lo earning individuals, most times lower earning hourly wage, people sometimes working in fast food industries or hospitality industries.

Most of these individuals, especially when you start to take into consideration the standard deduction and other tax credits, they aren't really paying the income tax as is.

There's questions about whether this no tax on tips will apply to the income tax or whether it will apply to other withholding taxes that that has implications for Social Security and Medicare.

I think this is a very short sighted plan that's not really well thought out.

There are ver there are other effective ways to get lower earning Ohioan and Americans some tax relief.

And that's a better, better way to do that is through a an expanded earned income tax credit.

That'd be a better wa to get working Americans in Ohio and some tax relief or for those who actually need it, as opposed to broad exemptions that really are targeted for people who could benefit from it.

I want to bring joy into the conversation because obviously you work with lower income people, many of whom may be earning tips and having this is an issue for you.

Yeah, I mean, I think it's a great point that we to me, we have proven policy within our tax system that has worked for a long time for low wage workers, gig workers, folks who are self-employed who are small business owners, for families with young children.

We have a and the ability within our tax policy to really targe direct relief and direct support to people on certain parts of our economic ladder.

And, you know, the formula is there.

So wha I think we should really focus on is talking about how we expand how the ITC targets childless workers.

You know, it doesn't do a lot for young, childless workers who are starting off and trying to get momentum right now.

And, you know, we should really focus on expanding that both at the federal level and then here in Ohio, you know, we have an opportunity to make our state ITC refundable for some of those lowest wage workers.

And hopefully we'll get to that in a little bit.

But, Amy I want to ask you, since again, you've got the the national view here, how does Ohio fit in with other states in terms of the trends of tax policy that we've seen?

Yeah.

So I lived in Ohio for a quarter century.

And I think what is really hard is I come back to the state and there are just so many people doing so many great things in the state.

The city looks beautiful, but I have watched as Ohio has just systematically cut taxes for the wealthiest people and corporations shifted taxes to lower income taxpayers by cutting the income tax, which is levied according to ability to pay and shifting to a sales tax and reduced its ability to invest in the very things that make our economy strong.

So it's very hard to watch because I'm looking at other states that are doing good thing to make sure that the wealthiest and the corporations pay their fair share and doing much more as a result to invest in their kids and invest in their familie and invest in their communities.

So it's it's kind of har to kind of come back to a state that you like so much and feel that so many legislators are making decisions that limit our future.

I want to ask you about that, because this leads into the whole discussion about state policy.

The personal income tax has been a target for Republicans going back decades at this point.

Former Governor John Kasich said he was going to cut the income tax.

He wanted to move t a consumption tax and sales tax.

The latest bill that's out there and I mentioned it in the intro, would phase out the income tax by 2030 and get rid of the commercial activity tax, which is the largest business tax.

What would be the result of that?

Why would we want to do this?

Well, I think one thing is going to have to be very cautious about how anything remotely like that is done.

We've seen states move towards eliminating, say, the income tax by guy and Steve's on the record.

We're for that, but we're for it in a long term sense.

It needs to have a long glide path.

It can't be something that's done short term.

It has to be done with revenue triggers, meaning tha if revenue targets aren't hit, you delay some of the tax reform or the cuts so that you don't end up with an unbalanced budget.

We have a constitutional provision in Ohio that you have to have a balanced budget.

So we can't do what, for example, my home state.

I was born in Kansas.

Kansas screwed up royally.

They're a poster child for how to do tax reform badly.

They cut taxes dramatically without doing any kind of budget reform or anything like that to and they didn't do it in a long term perspective.

They did it much more quickly and to rapidly.

So I think we need to be very careful.

They had to.

Repeal.

They did, actually.

And they actually, I believe, even overrode their governor's veto at the time to do that.

So because it was a so that is not the model.

The model is smart, strategic long term letting growth happen.

Long term is six years long enough.

I mean, that's I.

Would think six years is a too short.

And I would say that long term, a long term strategy to decimate your ability to raise revenue from those most able to pay and decimate your ability to deliver the things that your communities need is not a strategy at all.

I mean, it's a strategy for Ohi to continue the path it's been on, which is lack of growth in population, growth in wages that is far behind the nation, growth in jobs that is far behind the nation and culture wars, which is what the junior senator from Ohi is wanting to deliver right now.

So I think it's it's really based on some of the bes research on the on the tax plan.

But it's not a plan.

It's a it's a plan for disaster for the state.

I want to ask you about that, what the research that you have on this, what what would be the practical effec in Ohio in terms of how people how people pay?

Well, where as Amy said, the income tax is the one tax in Ohi is based on your ability to pay.

Limiting that as long as wel as what the commercial activity tax we're looking at over $10 billion in lost revenue.

I think it's closer to about 13.

About half of our total stat tax revenue would be gone from eliminating these new taxes, just trying to recoup half of that through sales tax revenue and assuming that increase economic activity will will help boost some of that revenue.

That is very wishful thinking.

We'll have to increase our sales tax to some of the highest in the nation above 8% just at the state level, just to get back half of that revenue.

And that's a big shift toward shifting that tax balance from, again, the income tax being based on your ability to pay to the sales tax, being a very regressive tax that will take up more income for lower earning Ohioans.

Greg, I want to ask you to weigh in on that briefly, that the sales tax is regressive.

It hits people who make less, well, money harder.

I will also say that a lot of staples of life are exempted from the sales tax base as it is like groceries.

I mean, there's different things in the checkout line.

It's all like that.

But staples are exempted.

But I'll tell you that here's the issue.

When you look at academic literature on economics, when you tax more of something, you're going to get less of whatever that item is.

Now, you still have to tax things because you still have to raise revenue.

So what you want to do is you want to have the least distorting tax possible, a tax that that doesn't influence the decision making of individuals or the decision making of businesses.

So you want to try to find that a low rate, broad based consumption tax makes more sense.

One thing Ohio needs to think about, if we are going to get serious about doing something on the income tax side is they're going to have to eventually look at broadening the sales tax base so that we can ameliorate some of the issues with some of the rate increases.

Because I agree, the rate increases that you would have to do to to do this in a very short time period would be usurious.

It doesn't make sense.

Plus, counties have piggyback sales taxes, which would make especially anywhere that's on the state border, a problem and stuff like that.

So we'd have to do it.

But we needed to start thinking about base expansion.

You want to tax more or less.

If I can just jump.

In as well, because pushing or expanding the tax base means that Ohio will have to start taxing things such as groceries, such things as prescription drugs.

So are we really going to ask seniors who are trying to afford their medications or mother trying to afford their groceries to pay more instead of just having the rich pay a little bit more through income taxation?

We have and I was just piggy back little bit on what Bailey said.

The my organization is the Institute on Taxation Economic Policy, ITP dot org and we work with policy matters Ohio to do the the numbers for the tax plan.

It accounts for the item that are exempt from the sales tax and we still find that it is a massive shift from the wealthiest Ohioans to working class and low income Ohioans when we when we shift to a sales tax.

So the fact that some things are exempt, great.

But it doesn't change the fact that this is a shift from the wealthy who can most afford to pay onto the lowest income.

And as as jury said, I mean, I guess we'll get into our earned income tax credit and our lack of a child tax credit in Ohio, which so many states are moving to start having.

But we just are doing so many things in this state to shift taxes from those most able to pay to those least able to pay and reduce our ability to invest.

But isn' there's also another effect here of ta shifting to local communities.

Aren't don't they have to start making up for the revenue that they're losing?

Well, potentially some.

But I'd also say that one of the things that Ohi has not done a very good job of and this stray a little bit outside tax policy, so I'm not going to go down that rabbit hole too far.

But how do we structure local government?

How many layers of local government, how many services, duplication of services, various things like that.

One thing that I've worked o ever since I've been a Buckeye, and I think it's something we need to continue to talk about is the very structure of local government is is very complicated in Ohio, more so than some other state because we're a home rule state.

A lot of this goes back to how the state was created, Northwest Ordinance, things like that.

But the problem is, is that because we have so many layers, we have layers of taxation that kind of build upon each other.

And the question is are we always getting the bang for the buck of the services at the local level?

I would argue that we haven't done a very good job on the structural basis of things because really the taxes are downstream of the services.

People want services.

That's true.

People are going to want to pay for services.

I think that's absolutely correct.

But the question is, how much are you paying for those services?

If you lower the state incom tax, you lower the revenue you.

And also the other element here is the lowering of money that goes from the local government fun that goes to local governments.

Jury, I think you wanted to speak here.

I mean, yo you rely on local governments.

Serve many, of course, broadly health and human services sector among many other sectors, among basic need that we all rely on every day.

Right.

When we talk to food pantry visitors, we talk to we a 2300 food pantry visitors earlier this year about why they're coming to our lines, what are their experience right now?

They're telling us about the choices they're making between affording transportation or affording food, affording child care, affording food.

We need revenue to be able to fund affordabl child care for low wage workers so they can continue to get to work.

Right.

Then all of that rolls into a conversation about making sure that we have work that pays long term.

When I think about a tax base, I'm thinking about we're seeing one in 5 to 1 in fou or more in some places of Ohio of our food pantry visitors that are over 60, they found themselves in their golden years.

They don't have the savings that they expected that would stretch far enough to afford.

When I think about property tax burden on them, sales tax burden on them, you know we need a base of of tax revenue that's going to support services for the life of a population in Ohio that has aged.

I think what we all want our older adults to live with dignity in place, and that's part of raising adequate revenue to do so.

It's been mentioned a couple of times here, the earned Income tax Credit.

I want to talk about that a little bit.

And Bailey, I want to ask you.

Ohio has a nonrefundable earned income tax credit.

What's the benefit of having it be refundable?

Why do that?

Right.

So the benefit of having it be refundable.

So if you have a negative or you don't have a tax liability at all, you don't have to pay any tax, you've already paid too much through withholdings, whatever the case may be.

If it's refundable, you still get the value of that credit through a refund.

And that's the best way to ensur that lower income individuals, again, as I mentioned earlier, people who benefit from the standard deduction and other tax credits that lower their their tax liability get making sure these credits are refundable gives them the value of that credit.

Here in Ohio, our EITC is a 30% nonrefundable credit.

So it's it' completely worthless of Ohioans who do not have a tax liability.

And it kind of really goes against the entire basis of the attack when it's trying to give incentives to various peopl and trying to give them various.

Why not do that, Right.

Well, I think the well, the first thing is a lot of folks part of it is we've dropped a lot of people off of the income tax period.

So that's one of the issues is if you're not paying an income tax, which is was said.

So we've lowered it.

And then I want.

To jump in here, but I'd say.

Look the federal one is refundable.

I think that there probably needs to be some conversations in the child care space.

I know those are happening at some level at the General Assembly.

So we probably are going to talk about that.

And depending on how we want to structure something like that, we're going have to be a little bit careful because unlike the feds who essentially can kind of monetize that and do things like that, we the state doesn't able to do that.

So we have to be careful if we're going to start moving in the direction of making the state income tax or having the refund ability there.

But if you have a liability, it should be able to zero it out.

That is what that' what a nonrefundable one does.

But again, we have a lot of people that are already off of the income tax rolls.

And I think what we probably really need to start focusing on in Ohio, too, is and this is why taxation gets so complicated is it's not just the state level or the federal level at the local level to the municipal income tax in the state of Ohio is a tax that everybody pay who makes money no matter what.

Everybody pays it and it's a flat rate.

So when we talk about that, there's no progressivity to the local income tax.

Now we can argue about whether that's a necessary revenue stream for local governments, but let's understand what that means for individuals to do that.

I want Amy to jump in.

For those of you who don't know it, Greg and Karen and used to do this regularly when I when I lived in Ohio and I have regularly missed Greg because we we enjoy mixing it up.

But but he's saying some things that I think are a little bit confusing.

First of all, one of the good thing that that one of the good things about the Earned Income tax credit, this is designed not only to offset income tax payments, but to offset those tax payments.

Those precise tax payments that Greg is advocating go up that are disproportionatel borne by lower income families.

So the earned incom tax credit doesn't just offset income taxes.

It also offsets sales taxes, property taxes and other more regressive forms of taxation that lower income people pay more of.

And that hasn't gone away.

Almost every state, you know, earned income tax credits.

I was so proud when Ohio passed that.

But other states have really leapfrogged us because most of those earned income tax credits at the state level are refundable now because it doesn't make any sense to say we want to help people work, but we're going to leave out the lowes income people when we do that.

And there's a similar debate on the child tax credit.

And I'll just say one more thing, because Greg mentioned wanting to lower the rates and broaden the base.

That's something that anti-ta people always say when they when they want to shift taxes away from the highest income, they say we're going to lowe the rates and broaden the base, but then they don't broaden the base.

And we saw that at the federal level with the 2017 tax cuts that the base wasn't broadened, that 55 profitable corporations paid zero taxes after the passage of that supposedly rate lowering, base broadening.

So I and I will just say one more issue that I think they should.

Thank you.

I'm going to share your picture.

And would just say one more thing.

I think it's interesting that Greg wants to be so cautious about the potential cost of refund abilit of the earned income tax credit, but doesn't want to be cautious about the cost of delivering more and more and more tax cuts every year to the wealthiest Ohioans.

I think if we want to be cautious about helping the lowest income Ohioans thrive, we want to be certainly cautious about continuing to reward the wealthiest Ohioans.

There's another area where I think you folks agree the LLC loophole and that is where LLC can exempt the first 250,000 quarter of $1,000,000 in income and then pay a low tax rate on the rest.

It cost the state $1,000,000,000 a year approximately, and there doesn't seem to be a whole lot of evidence that it creates jobs.

I mean, Bailey, have you seen any evidence of that?

Not any.

No, not in our research here.

There's really no good excuse for it.

And my opinion.

So, yeah, let's loo that causing us $1,000,000,000 that could help us pass a completely refundable child tax credit that could help u find a refundable EITC at 10%.

Four times.

We could do that with this money.

And it's a much better investmen in working in everyday Ohioans.

Right?

Why not?

Well, why do we have this?

Well, the idea is that it was meant to be for small business owners to be able to get to because you see that they can make investments back, hire people, do things like that.

I'm not sure that it's as well targeted as it should be.

That's basically what we're hearing here.

So, you know, lawyers typically can use this a lot of folks like that, you know, they don't necessarily hire somebody else just because they made some of that.

I will say, though that you do need to be cautious because there again and I know I use that word, but this is why tax reform is obviously a very challenging thing, because if you raise that on certain like contractors and things like that, you could have some real negative impacts on some small businesses that do have potential job impacts downstream.

One thin I think that if you're going to move towards this income tax elimination idea, like some members of the General Assembly are pushing for, you would, I mean, at some point you wouldn't even need to have the small, quote unquote business loophole because you'd have no income tax.

So you would probably want to reduce things as you phase it out.

So I would not I'd be careful about trying to jack it up as you're phasing down the income tax as well, because at some point that doesn't make sense to do it that way.

But we have to be careful.

I think we could have been a little more cautious and how we initially put some of this stuff together, because what we've ended up doing is if you're really serious about getting rid of the income tax, as some members of legislature want to be, they've made it really hard for themselves to do that because of how they've structured previous rounds of tax.

And there have been efforts to try to get rid of this loophole that happens.

To pay for lowering rates.

You can make an argument that if you phased it up, you could lower the rates commensurately for everybody.

Something like that.

It's kin of pulling the different levers.

Amy's dying to say something.

Well, I've actually los a little track of the Ohio LLC loophole, but what I will say is, like backing up from a federal level, what I see is that is that the states that are doing the most for their families and the states that are growing the quickest, and this is states that are really diverse in terms of where they are geographically and where they are economically are the state that are recognizing that they that they have to tax the wealthiest more and that they have to tax corporations more, because that is actually what enables them to invest in things that enable corporations to thrive.

Right.

Like if we don't have a good K-12 education system, if we don't have a good college system, if working class kid can't afford to go to college, then how our business is going to thrive in that state.

And so I think the states that are growing fastest and seeing the fastest income growth and the fastest population will not always the fastest population growth, but the fastest income growth are the states that are choosing a more investmen oriented approach to taxation.

I want to.

Ask, do you depend on businesses, in many cases in your communities?

Your thoughts here?

Yeah, I mean, I think I like to think about what we could do with $1,000,000,000 like Bailey talked about.

And I and I'll tell you wha we do have research and evidence for is what targeted tax credits lead to immediately, right?

So when they advance, expanded child tax credits were in plac for the last six months of 2021, we had many, many fewer families with children coming to our food pantry lines because nine out of ten low income household across America use those dollars to buy food, to buy clothing for their kids, to keep up with their utilities and fix their roof basic necessities.

We have evidence acros the life of targeted tax credits that shows it does everythin from reducing infant mortality to supporting, you know, economic mobility, maintaining workforce participation and increasing workforce participation because it puts dollars in families pocket.

So, I mean, I really get excited thinking about the value of taxation and revenue and what it can mean for communities.

And I think businesses want that right.

They want they need paved roads, right?

We know Intel needs paved roads to get all their workers to them.

We we know that they need they want workforce participation, which means they want parents to know that their kids have a safe place to be cared for.

And they they want families that want to stay here for the life of their career.

So I really believe in that.

Yeah, we're going to go to audience questions here in just a moment, but I want to bring up the idea of property taxes.

And we don't have time to get into all they're part of this mix as well.

And the Republican co-chair of the bipartisan committee at the state House that's looking into property taxes and all the things that go into that has said that a list of recommendations that was supposed to come out in June probably won't come out this year, maybe.

But property taxes I want you all to kind of weigh in on how they affect this whole tax policy argument and conversation.

Yeah, So property taxes, are you know, much less progressive than the income tax.

They're probably not quite as regressive as a sales tax, but there are really targeted way to make sure that we can prevent the people who would struggle to pay their property taxes from doing so.

And the most targeted way is something I think Bailey testified on, which is something called a circuit breaker, which is just a mechanism to lower property taxes if they become too high a share of your income.

And I think that that's what we need.

You know, Greg talks about caution.

I think that's a real are where you can bring a precision to who you are helping rather than kind of lowering rates across the board.

At the same time that you're going income tax rates, which basically just leaves communities unable to invest in the things that matter?

Well, I think whatever you do temporarily to fix today's problems, the immediate amount of pain the people are having are going to be Band-Aids.

Something like a circuit breaker could work, I think in a targeted way.

It'd be expensive to the state probably to do that.

I camerer what LSC has looked at it, so there would be some some issues there.

But here's the bottom line.

We're not going to fix that problem.

We don't talk about the structure of government.

These tw things are inextricably linked.

And so the problem is, i that you could fix and probably you could expand the homestea exemption, you could target it to add to a whole bunch of folks that way to expand that.

And that could ameliorate the problem.

But it doesn't fix the problem because, again, those taxes are downstream of the structure of governmen and how we're funding services and how you have to fire departments within less than a mile of each other from two different local governments, but they're within the same county.

How do we structure things like that?

These are the hard conversations of looking under the hood, because frankly, I think we should be lowering the price of taxes.

And we also, by the way, should be doing as much property tax abatements we have because of municipal income tax.

We abate property taxes and let cities get money on the income tax.

Municipal income tax.

That's not good.

So we carve out all these holes in our property tax base, which means that we diffuse that cost to residential homeowners.

That's ridiculous.

We should have again this is about the base we need.

To close.

Down.

So I don't interrupt Greg as often as I used to, because we've got a bi part.

Of your I want to leave.

Room for other people, but I do have things to say.

But I really got to.

I want to give Bailey an opportunity to weigh in here because there are a lot of bills in the legislature that would deal with little areas of tax, property tax policy.

Right.

And and as Amy said earlier, the circuit breaker is the best way to target property tax relief while considering all the people and entities that rely on that property tax revenue for a couple of things in Ohio can be true.

One about our property taxes is that, yes, our property value have been seeing a great rise, historic rises that does not equivalent to one for one raises and property taxes not going to get into the intricacies of our House Bill 920 but right now it is keeping property taxes down in terms of ensuing in times of great inflation, in times of great value increases, people there are people who are struggling to pay the burden from that property tax.

But the circuit breakers, the best way to do it, as Amy said, because it looks at the burden of your property tax compared to your income, it takes it away from you.

Look, you you implement it through the income tax base or the income tax credits so you don't mess with like the fair school funding plan which has implications as well.

But also pay for by the state.

You're not hurting the local governments that rely on that revenue.

Again, we could spend many hours talking about this and you mentioned House Bill 920, which is the school funding.

Oh, yeah.

State House reporter goes, I don't want talk about that.

So, Jerry, before we go to audience questions, any final words here briefly?

Yeah, I think we need to look at how we got here.

Right.

So for many, many years, we'v progressively cut income taxes for the wealthiest Ohioans, and so we're left with localities that are trying to make up the difference.

And there's a whole host of reasons for that.

But I think long term, to your point, Greg, that we maybe we need some Band-Aids now, but we also need to really focus on how w adequately fund local services.

I love every part of Ohio.

I'm here on behalf of all of Ohi and some of Ohio has a greater local tax base than others.

And I think our state income tax gives us a chance to have equity across every region of Ohio from Cleveland down to Appalachia.

We are about to begin.

AUDIENCE Q&A for our live stream and radio audience.

Are those just joining?

I am Karen Kasler, Statehouse bureau chief for Ohio Public Radio and Television.

We are examining taxation in Ohio and the nation with Amy Han, our executive director of the Institute on Taxation and Economic Policy.

Greg Lawson, Researc Fellow at the Buckeye Institute.

Jory Novotny, the executive director of the Ohio Association of Food Banks, and Bayley Williams tax policy researcher at Policy Matters, Ohio.

We welcome questions from everyone City club members, guests, those joining via our live stream at City Club Dawg or Radio broadcas at 897 Ideastream Public Media.

If you'd like to text a question for our speakers, please text at 233054157943305415794 and City Club staff wil try to work it into the program and remember, questions end in a question mark.

Just stating that again, we have the first question, please.

Thank you.

Incredible discussion.

My question is for Mr. Lawson.

I agree with you about the structure of local government but what can the legislature do?

I mean we have so many different school districts, municipalities, etc.. What can the legislature d short of what it has been doing the last ten, 15, 20 years, which is essentially starve the beast by lowering the income tax and in effect, then raising the property tax by cutting off relief for property tax, forcing, you know, municipalities and counties to raise taxes.

And nobody is getting the idea well, maybe we can cut our cost by consolidating.

So that strategy doesn't seem to be working.

What would work?

Well, it's a great question.

I think it is a tough question because you're right, there's been an effort to do that.

I don't think starving the beast really works until the beast is actually starved.

I mean, look, a lot of federal money has come in.

Part of inflation has been because we probably overspent at the national level.

In the tim after there was some recovery, the local governments got a lot of money, parachuted into them from the feds.

They haven' had to make structural changes because we had all that coming in like a knight in shining armor.

I will say this I think the legislature can, though, empower certain local governments.

I think county commissioners have it could have a greater I mean, maybe it's other county commissioners.

We can have a debate about where it should be, but we have local taxing authorities that can get direct ballot access without going through the county commissioners.

What happens is we have Levy after Levy after levy, taxpayers don't think about the fact that the one they voted on in the fall is going to be aggregated to the spring when all you ever hear about is that.

So we have to think about how do we structure those kind of questions, How do we have a regional o at least a county one come down?

But I haven't.

Come down that oh, oh, it's coming.

You got to watch it.

It has all been generated.

I think it is fascinating that Gregg's I, Gregg is concerned that we have local taxation levels that are different, but he thinks the solution to that is cutting the state income tax because that's exactly backwards.

Right.

If we if we want to have less local taxation, the answer is to have more taxation raised at the state leve and distribute it in a fair way.

And I was always extremely proud when I lived here that Cuyahoga County did such a good job of passing a team in service levy because Cuyahoga County residents cared about the most vulnerable people in the county, I was certainly proud.

You know, I raised my kids in Shaker Heights.

They got a phenomenal education.

I think it was the highest tax school district in the state or second.

And I was proud to pay those taxes and to know that those schools would be high quality so that they would have higher graduation rates, more ability to deliver people to college.

But if going to advocate for lower local taxation, it is just backwards to then say the solution to that is to cut the state income tax further and starve local governments.

And I just the last thing is you say starve the beast.

The beast is our schools.

The beast is our community.

The beast is how we how we reduce poverty.

And so, you know, you may want to starve, but.

We are in the historic amounts in education.

And the report cards came out in the last couple of weeks.

But that's all.

Really well, we we were far.

Behind in our funding for education.

But let's let's move to another question here.

I don't want this to stop.

Oh, hi.

Well, good afternoon and thank you for a fantastic conversation and shout out to the county for having two health services levees and thank you to the voters for all that they do.

I wanted to ask a question about an article that I read from CNBC, and it talked about America' top states for business in 2024.

According to that study, Ohio is ranked number seven on that list.

Also, according to and CNBC, Ohio ranked a score of 38 or letter grade of F in workforce.

My question is, is we're looking at the implications of election at the national and state level.

What is the impact on the workforce opportunities in the state?

Thank you.

Well, that's a great question.

And who wants to take that?

I'll tell you, the firs thing is, I do think sometimes these business rankings ten to be skewed to big businesses.

And one thing I think Ohio does pretty well, and that's part of the problem with the tax code, is we lay out the red carpet through tax abatements and things like that for big businesses.

But one of the things that I'm arguing for, I talk about lowering the rates across the board is broadening the base.

Now, that hasn't happened to Amy's point the way it should, but it should that because that's what tax reform is.

Tax reform, maybe lowering rates and doing cutting.

But it's also about broadening so that you're structuring the tax code in a way.

We, for example, we don't have consumption tax on a lot of services.

Now, there's complexities to that, but we're a much more service based economy now.

So we have a high rate on less items.

That's a problem with having a on balance sort of tax system.

So I think we don't do great job for smaller and middle sized businesses in Ohio, but we do a great job rolling out the red carpet for big.

Who wants to jump in here?

I think this comes down to supply and demand for me.

So if I'm a worker who wants to come to or stay in Ohi and contribute to our economy, I need to have an array of services.

I need to have affordable housing.

We need to bring housing back.

In this conversation over and over.

We know for years that we haven't been building enough housing in our communities.

So it's a supply issue.

All of those services need to be equitable and available so that the workforce is is.

Equally able to.

Stay and participate and hopefully come to Ohio.

Right.

And be part of par of the grand state that we are.

But we need to understand that workers need to see how their dollar is going to pay over the lifespan of their participation in our economy here.

Another question.

I'm Joan Sprawl.

I'm with the Literacy.

Cooperative.

Where I'm director of Dolly Parton's Imagination Library.

And, oh, and I'm on the board of the Black Chil Development Institute of Ohio.

And as part of that work, I'm on the steering committee for the Ohio Prenatal to three Coalition.

So I want to ask you to expand a little bit more about what we know about investments, the return on investments when we for prenatal to that prenatal to three period.

It's a long term return o investment, but it's a big one.

So I wanted you to expand.

A little.

More on that.

Yeah, I mean, I'll just start by saying I think the biggest thing we can do through the tax cod for that population is to have a refundable child tax credi at the state and federal level.

And we saw during the COVID legislation that we were able to cut child poverty nearly in half with an expanded child tax credit.

And again, we see states really diverging on this.

And this is a them that I really see happening, is that states are just diverging in what they're doing.

So the smartest states are starting to really invest in that population.

And that is something where you have to be patient because it takes a little while to pay off.

If you're investing in a two year old.

But it really does pay dividends in terms of lower long term poverty rates, in terms of higher high school graduation rates, in terms of just all sorts of positive outcomes for children if we put in plac a refundable child tax credit.

Greg, is that a good investment?

Well I mean, I think they could be.

I'm not sure if I see this as a as much of the tax policy, though.

I mean I think that there is questions about what how we spend and how we target certain resources.

Some of this is which is what you spend an how you structure the programs.

Which is tha you have nothing for spending.

If you continue to cut the income tax.

If you grow the economy and you expand the base.

That is ancillary revenues and things.

That so that.

Well, I'll tell you that that the problem is that yes it's worked in the sense that I think if you look at Ohio, I mean we talk about it like doing this hasn't made any reform.

Ohio, I used to have a really high by the way, Ohio's been goin behind the nation for decades.

This isn't a new thing in the 89 in the eighties, before we started cuttin any of the income tax brackets, we were already going downhill in the in the eighties.

Now, with a lot of that, you know, manufacturing and get into globalization and stuff like that.

So there's a whole host reasons beyond tax policy.

Ohio has been following like I have to take my hat off to you because Ohio is following your policy.

You know, I was here for 20 years trying to say tax wealthy people and invest in families and invest in communities.

And I lost.

I mean, I lost and I left.

And you are still here and you're winning.

And Ohio has followed your example.

And we've fallen behind the nation in wages.

We've falle behind the nation in job growth and we've fallen behind the nation in the growth of our economy and in population.

So it hasn't worked.

It's been a disaster for the state.

And I think it precedes all of that, though the long term trends for Ohio were already pretty bad before we started talking about tax reform.

You But you've I mean, that's not true.

And I'm happy to talk.

I mean, I' happy to talk about the reasons for the deindustrialization and the problems with that.

But the truth is that you'v had control over the legislature and the types of policies that they've pursued over the past two decades, and they've been a disaster.

Speaking of the legislature, let's thank you.

I'm Shaun Brown.

I represent Ohio's 14th Ohio.

House District 14, which is Parma, Parma Heights and about a third of West Park.

I've been a member of th legislature for 22 months now.

It's been an honor to work with all of you.

I have some fun lunches with Greg Lawson down at the state House, but, you know, in my 22 months in the legislature, one of the thing that I've perceived is the lack of institutional knowledge in the institution and a lack of long term thinking.

And I think that's attributed to the short terms.

For instance, I've only been 22 months.

I've had to spend the last several months campaigning for reelection, which is diverted my attention away from legislating.

So the lack of institutional knowledge and long term thinking to me is attributed to those short terms and the short term limits that we have.

I'm not saying I'm oppose to term limits, but what do you what are your thoughts along those lines?

I mean, should the terms particularly for the House, be expanded, you know, lengthened and should term limits be lengthened in Ohio.

So that we could different directions here?

I mean, I think anyone who works with the legislature across any any side would agree that we've los a lot of institutional knowledge after term limits were introduced.

And I can't pretend to know what that should look like.

So I won't attempt to representative, but I mean, I think that' very fair from my perspective.

And why the Buckeyes, who doesn' have an official position on it.

But I'll tell you my personal position, which is I think tournaments are a bad idea.

I think that they look, there' no way there's there's problems with not having term limits, too, because you can get entrenched power and not getting new fresh blood to look at problems.

So it's not a perfect solution either way you go.

But here's the problem.

You lose that expertise.

We're about to lose some more long term member because of term limits right now going into the next general Assembly.

And I think that that you hav to understand the complexities.

We talk about the property tax issue.

You've got Representative Troy, who's o there, used to be a legislator and a long time county commissioner.

Yes.

Yeah, Dan Troy and all.

But, you know, he's on there and he's one of the people who probably knows more about local tax issues than anybody else in the General Assembly.

But he's only going to be there for so long.

I think part of the problem, too, is the effec that that has on lobbyists who make their careers in these areas.

It's even about the relationships that get to develop across the aisle with legislators across their careers and whether or not that has room to breathe.

So that, you know, really tough conversations can be had over a decad rather than a couple of years.

Let's go to another question.

Hi, I'm Erika Frankel.

I'm the data and model director from the Institute on Taxation and Economic Policy.

Well it is a DC based organization.

I actually live and work out of two small towns in Hey, Portage County, Ohio, which I'm sure you'r all familiar with at the moment.

Yeah, the town I live i has about a thousand residents.

The town I work in has les than 5000 really small places.

First of all, Greg, I do want to set your mind at ease on one thing.

We know how levees work.

We're not confused by that.

We can tell the difference between a renewal and a new levee.

So we're okay on that.

I will also say that when the entire block right across from my office burned to the ground a few years ago, we were really happy to se all those local fire departments show up.

You have a question?

I do when I pay my local taxes.

All right.

I have very direct access to the people who are in charge of how that money gets spent.

And I have a really hard time getting the attention of my stat representatives on any of this.

So my question to you is, without local taxes, what are the odds of the state is ever going to come fix the sidewalk in front of my house?

Well I think look, here's the thing.

Obviously, there's still going to be local governments and they're still going to exist.

The question is, do you have to have separate ballot authority for all of these things or can you consolidate some of that and have a more simplified mechanism by which those things can happen?

And and, by the way you know, how many people know what a replacement levy is in this room?

Okay.

Pretty good.

Pretty good percentage.

About half maybe.

Maybe a little over.

Half, you know But that would still say close to 50% of people probably don't know.

And I won't g into the brutal details of it.

But this is one of the issues is I don't think a lot of people understand some of those nuances.

And I don't think sometimes those are portrayed in a particularly fair fashion to local taxpayers.

So I think that's somethin that we need to be careful on.

But look, local government is still going to exist.

You're still going to have fire service, you're still going to have these things.

The question is, do you need to have how man and how many township folks do you have?

How many city folks?

I've been to villages that have a literally a village over here in a township fire departmen on the other side of the street.

Right.

So the question is, how do you.

Get local government.

What they do?

And if they like it so much and they need to try to stop complaining as much about the property tax then because they vote for it.

So that's I mean that.

Right?

I mean, so then we shouldn't complain about that.

But if they're going to complain about that, then they've got to realize that that's part of the issu as to how we deal with things.

And we got to ask ourselves those questions.

And if they decide.

To do it, take another question here.

All right.

We have a tax question.

The highest scoring state are the ones with no income tax.

People are leaving high.

Tax states and.

Moving to low or no tax.

States.

Why is lowering Ohio's incom tax to be more competitive bad?

Yeah.

So thank you.

That's that's a great question.

And it's an inaccurate question because it's just simply not true.

When we look across the board, what we see in the no income tax states is high rates of poverty.

We see low wages and we see really, really just high problems across the board.

So it is true that when you have this kind of race to the bottom approach, you can have legislators and governors trying to compete by lowering the tax.

But it it it ha not succeeded for those states.

And what we are now seeing is a lot of smarter lawmakers instead embracing an approach where they invest in people and where they recognize that they have to do that with revenue.

I will just say I will just say that there is that the race issue.

I don't know if I go so far to say race to the bottom, but that is an issue.

If you stay stagnant with your tax rates, other states lower their tax rates.

There is an arbitrage effect that you start to run into across state.

So you have to be a little careful with that and context based.

I just want to bring Dorian Bailey into this because, Bailey, you look like you want to say something.

I just think that peopl when we're talking about state income taxes in particular they are such a low percentage of your income that I think people really don't take it.

Is it a factor that people consider?

Absolutely.

Just as so much as a facto that you consider the weather, where you're going to be living, your neighborhoods, the the soundness of your community at large?

So what's the difference between the the 3.5 that I'll pay right here in Ohio or the 4.1% flat rate in Michigan?

Peopl really don't look at state taxes on the margins like that when considering moving or where to live.

Right.

One more question here.

Hi.

Good afternoon.

Emily Campbell from the Center for Community Solutions have enjoyed working with most of you and look forward to working with those of you that we haven't.

Had the opportunity to collaborate yet.

We know that the public budgets are moral documents, and we spent an awful lot of time talking about.

How the money will be spent.

So I deeply appreciate.

This conversation talking the total amount.

That.

Ohio may have in order to invest.

But when I look at.

One area.

Where I'm.

Particularly.

Concerned, it's related to older adults.

New census data came out just last week.

It shows.

That Cleveland continues to be the second poorest.

Large city.

In the country.

And we're seeing.

Poverty among older adults rising much faster here than across the country.

Where it also.

Rose.

And when we look at age breakdowns.

We see an even higher povert rate for those who are 60 to 65.

Or 55 to.

60.

So it's not like people are hitting 65.

And becoming poor.

Got to get.

We talked about children a lot.

We talked about working families.

We've talked about small business owners.

Where are the solutions to address tax.

Burdens on older.

Adults?

I want to bring Jory into this because food banks are servin older people in bigger numbers.

Yeah, it's been a trend, and so it's a trend that was exacerbated during the pandemic, of course.

But we were trending for years.

We were seeing a tsunami, a silver tsunami, as my predecessor, Lisa Hamler Fugate, was fond of calling.

So year over year over year, we're seeing a larger number of older adult and a larger percentage of those that we're serving that are older adults.

And of course, you find yourself now, I'm okay.

I'm 70, I'm in my community.

I own my home.

I'm living on a fixed income.

I thought that fixed income would stretch enough.

The reason for my increased property taxes is complex, but a reason that is far outside mine or any of my neighbors control is whether or not adequate housing has been built to support the needs of a growing, expanding workforce and population to support the services, the tax base that that I need that to be resilient and thriv and age in place with dignity.

So yes, then.

Instead, we're seeing mor and more folks that need access to basic necessities like food.

I'm going to let Greg respond very quickly.

We've got to get to.

One more question.

I mean, that's so again, the one thing I think that comes through is how complicated these issues are, because they're not mono causal.

They have so many different angles and different ways that you can look at it in the prism, refracts things differently.

I mean, we're going to have to spend a lot of money and I mean, we spend a lot of money on Medicaid.

We're going to have to continue to spend that.

So some of that is is going be tough.

I would sa we need to get a bigger tax base by getting more Ohioans here, though, so we can fund.

Shifting from an income ta to sales tax that does not help poor elderly families.

Right.

So we want to we want the circuit breaker and keeping that income tax adequate so that you don't have to shift to a sales tax.

We only have a couple more minutes left.

I want to get to one more question.

Go ahead.

Karen.

Thank you.

My name is Ed Stackhouse and I'm with Cleveland Neighborhood Progress, and today's sitting with the Center for Community Solutions.

I'm curious, just from all of the different panelists, if guests here with us today or listening on the radio are going to leav and look up one policy proposal that exists somewhere else else, whether it's in Ohio or another state, whether it's income tax property tax or something else.

What would you tell people to go look at, good or bad?

Right.

Well, let' go down the down the road here.

Refundable child tax credit.

Is.

The best investment in Ohio's future.

Closing tax loopholes.

All right.

Good answer.

I'm going to tease mine out in a few sentences, but I'll start.

I haven't brought we haven't brought advance premium tax credits into the conversation.

Just really, really want to point out that we have improved on our uninsurance rate year over year over years.

We have more people who are small business owners, who are self-employed, who are gig workers, who can also go to the doctor and not find themselves in medical debt.

We will lose those without extension of those enhanced.

And what that look would look like is 4.6 millio or so Americans losing insurance coverage from 25 to 27 if they're not expanded.

And we all need to be able to go to the doctor.

So that's something I think that we can look at as a really targeted example of how tax credits keep people in the workforce, keep them healthy and keep them in their communities as part of resilient neighborhoods.

Bailey, you're going to get the last word here.

Go ahead.

You got about 30 seconds.

It does a strong, robust income tax that funds the goods an services that the state needs, whether that go whether that be child care, healt care, tax relief in other areas.

You need a strong income tax that is based off of your ability to pay, that ensures a wealthy is paying their fair share to ensure the future is a sound future for Ohio.

You've testifie before the legislature before.

Do you feel that that's your what you're saying is going to happen?

I well, if I, if, if if the legislature is listening to me, don't cut the income tax, That's all.

Thank you to Amy Hanauer.

Greg Lawson Jory Novotny and Bailey Williams for joining us at the City Club's Day.

It's great to see you all.

This has been a wonderful conversation.

Forum like this one are made possible thanks to generous support from individuals like you.

You can learn more about how to become a guardian of free speech at City Club.

Talk, please.

Well, please join me i welcoming guests at the tables hosted by Policy Matters of Ohio, the Center for Community Solution and the George Gunn Foundation.

Up next, at the Cit Club on Friday, September 27th, welcoming the Anfield Wolf Book Award winner for nonfiction at Black Hawk, the author of The Rediscovery of America Native Peoples and the Unmasking of U.S. History.

He will be in conversation with the City Club's Cynthia Connelly on the critical importance o native history, not only to U.S. history, but also and urgentl to Native Americans themselves.

You can get tickets to this forum and learn about other program and forums at City Club dot org.

And that brings us to the end of today's forum.

Thank you once agai to Amy, Greg, Jory and Bailey, and to our members and friend of the City Club, Karen Kasler.

And this forum is now adjourned.

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