Ohio voters: "No tax increase"

from NewsLink, Volume 2, Number 3, Spring 1998

As if to ratify the Ohio Legislature's February 4 defeat of a proposal to increase the state's sales tax by 1%, on May 5, Ohio voters trounced the ballot issue that would have raised their sales tax from 5% to 6%.

Not one of the state's 88 counties supported the issue. The issue would have raised $1.1 billion a year to be used to pay for an Ohio Supreme Court ruling that mandated an overhaul of public school funding. It would also have provided property tax relief. Governor George Voinovich had campaigned vigorously in support of the issue.

Conventional analysis suggested that Ohio voters turned down the idea because they believed that public schools already have enough money. Another view suggested that the tax increase didn't go far enough to satisfy some education groups who wanted four times as much money for schools.

But something else also came into play. In January, the Beacon Hill Institute entered the debate when it determined that the sales tax increase would eliminate 1.7% of the jobs in Ohio and could cause unemployment to rise from 4.4 % to approximately 6%. BHI applied its market-clearing STAMP model to Ohio in order to generate estimates of the effects of the proposed tax increase on the state's economy.

The BHI analysis played an important role in turning the tide against the sales tax increase. Proponents of the increase appear to have been caught flat-footed when the BHI analysis appeared, lacking any effective rebuttal to offer in defense of the increase. The Ohio experience suggests that legislators and voters do care about the economic consequences of tax changes, once they are presented with credible evidence of what those consequences might be.

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NewsLink is the quarterly newsletter of the Beacon Hill Institute for Public Policy Research at Suffolk University. © 1996-1998. All rights reserved.

posted 6/10/98

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