John Kasich devoted much of his State of the State address to launching his re-election campaign for governor. He mounted a lengthy defense of his record for those gathered in the performing arts hall at Medina High School. He has achievements worth defending, from the bipartisan effort to improve the Cleveland schools to the collaborative work of state universities and colleges to the expansion of Medicaid, which won just a fleeting reference in the speech, the governor citing “some big steps last year” in addressing poverty, “especially in the health care.”
This governor hasn’t used the occasion in the traditional way, beyond moving the venue from the Statehouse. The proposals often are drawn broadly, more in the fashion of a sermon, with promises about details to come later.
One of the areas where the governor was more specific looking forward involved his pledge of additional income tax cuts. “We can get that tax rate under 5 percent,” he declared, having in mind the top rate, starting on income above $204,200 a year. At an earlier turn, he applauding having already reduced taxes $3 billion, rates now on their way to a reduction of nearly one-third. Why then reduce income taxes further?
The governor pointed to “the natural way to grow an economy. … when you get to keep more of your own money.” So “out of respect” for working Ohioans, “we’ve got to keep cutting taxes.” He added that it is important to keep “our best and our brightest” who are fleeing to Florida, where there is no income tax.
The problem is, his view relies more on belief than hard numbers. In the main, studies repeatedly have shown that income tax rates have less to do with growth and job creation. Ohio has the experience of recent years, its economy lagging the nation, even slowing of late, despite a substantial reduction in rates. More, there is scant evidence showing that people exit a state in a significant way because of tax levels.
In 2012, after a close examination, the federal Small Business Administration reported “no evidence of an economically significant effect of state tax portfolios on entrepreneurial activity.”
Economies are complex, involving public and private investments, businesses, individuals and other organizations. In relying too heavily on tax cuts, a state risks having insufficient resources to make a credible run at initiatives such as the governor sketched, in particular early education and dropout prevention. Might it have been enough to reduce taxes by $1.5 billion?