Category Archives: taxes

Open letter to the Beavercreek City Council, November 12, 2012

My name is John Mitchel. I live on Maple Grove Lane. I oppose the Beavercreek city income tax, but I want to make it perfectly clear I do not mind paying taxes…..my concern is lack of accountability from our elected officials in local, state and federal governments who irresponsibly launder our tax dollars to their friends in the private sector who in turn keep the campaign cash flowing to allow their surrogates to remain in office. Here are three examples.

The first is the Beavercreek Golf Course, which is costing Beavercreek taxpayers $845,000 a year to service the debt. We suffer those consequences while the politicians who passed the enabling legislation continue to receive campaign contributions from private developers who have made millions from taxpayer subsidized investments.

The second is The Greene at I-675 and Indian Ripple. It’s bad enough that Beavercreek City Council conspired to keep a voter initiative off the ballot that would have offered an up or down choice by the citizens, but while we were debating that, I asked Yaromir Steiner, the private developer, if he would make the investment without the $14.8 million from Greene County taxpayers and $2.7 million from a Dave Hobson-sponsored earmark. His tortured response was “No.” To put this in perspective, Mr. Steiner is on record as saying he would not invest his private wealth in The Greene without taxpayer subsidies in excess of $17 million.

Finally, I will address the 2003-2006 Base Realignment and Closure (BRAC) Initiative Agreement where our Greene County Commissioners, enthusiastically supported by Rick Perales, former member of the Beavercreek City Council, sent $1.9 million dollars to the Dayton Development Coalition, a private, not-for-profit organization. Once it arrived there, the Coalition divided it up by paying their CEO $285,000 in 2005 and paying Washington lobbying firm, The PMA Group, $560,000 during the period of performance of the BRAC Initiative Agreement. It’s important to note that $285,000 paid to the Coalition CEO* is about double what the governor of Ohio earns, and more than the Vice-president of the United States. Furthermore, it’s important you know that PMA’s founder and President is now in federal prison for illegally bundling campaign contributions, some of which went to Dave Hobson and Steve Austria. Unlike dozens of other members of Congress who returned the illegal contributions, there’s no evidence to indicate that Mr. Hobson or Mr. Austria did so**.

To summarize, our elected officials have not been good stewards of our tax dollars, and there’s no evidence they will do so in the future. The only way we can fix our local, state and federal governments if we stop electing these so-called public servants who are consumed by power enabled by a career in politics. In the meantime, our only choice is to stop sending our tax dollars until those that are in office can prove they will be accountable for their spending when those who do not have a voice continue to struggle in this anemic economy.

* Source: Dayton Development Coalition’s 2005 IRS Form 990

** Source: www.fec.gov

Unsustainable Spending Drives Local School Levies

In a November 2 policy brief, Buckeye Institute reveals the real reason for the Ohio Education Association claim that state-level funding cuts require many school districts to introduce new levies.

The Institute presents historical evidence for school district overspending. Average annual inflation has been around 4.2 percent since 1975 while school spending has increased by 5.5 percent on average during the same time period. In many Ohio school districts, average teacher compensation is 50% higher than the average income of residents in their communities. While the current legislature has increased school funding, median income is declining. Since 2001, median has declined 16 percent.

Because employee compensation consumes 96 percent of most school budgets, Ohio overspending on schooling is simply unsustainable.

How can this problem be fixed? The Buckeye Institute makes the following proposal:

“Simply providing more tax revenue is not going to solve the problem. If taxpayers in this state are ever to get a break from the hamster wheel of local levies, compensation reforms are essential. To accomplish this, collective bargaining reform cannot be swept under the rug indefinitely.” Changing Ohio collective bargaining law, local school boards would have more flexibility to adjust compensation to reflect current fiscal reality.

To read the policy brief, go to http://www.buckeyeinstitute.org/issues/education-k-12-and-higher-ed.

Passing the Xenia Schools 6.5 Mill Emergency Property Tax Levy: The Bottom Line (corrected)

by Daniel Downs

Since the Xenia City School District attempted to pass a 1.5 earned income tax levy in August, not much has changed. The economic situation is still uncertain. Employment is still near 8%, and growth is still very slow. The Congressional Budget Office estimates remain the same as is the outlook of economists like Nouriel Roubini and financial experts like John Mauldin. (see Passing Xenia Schools Income Tax Replacement Levy)

Also unchanged is the claim by Xenia School officials of a huge deficit looming over the election season horizon. On November 6, Xenia Community School officials want voters to agree that there is a dire need for landowners whose property value is $100,000 to pay an additional $200 per year in taxes. That is on top of the bond issue tax, the half-percent income tax, three or more previously renewed property taxes, Greene County Career Center taxes, city taxes, county taxes, state taxes, federal taxes, utility usage taxes including electricity, gas and communication taxes, sales taxes, business taxes, and many other taxes.

Why do school officials need more money? Past budget cuts made by the school district was due to rising costs of health insurance, utilities and diesel fuel costs, according to a recent Xenia Daily Gazette article. A Dayton Daily News article claims passing the emergency property tax levy will alleviate the looming budget deficit. Of course, giving Xenia schools $200 dollars more of your hard earned income each year will meet the most important need of all, benefiting student learning.

Will it not also assure administrators and teachers that they will continue getting union determined pay raises, health insurance that is continuing to rise, retirement, and other benefits?

We can thank our union President Barak Obama and congressional Democrats for rising health costs, and Capitol Hill bureaucrats and oil cartels for rising gas and utility pricing, part of which is funding research and development of new energy technologies.

But, what about the budget deficit? Here I want to make several observations based on the school district’s current 5 year budget forecast. The estimates assume a continual decline of daily attendance, which also means less revenue. The amount of taxes dollars returned to our school district by the state is determined by the number of students enrolled and attending. The forecast estimates that there will be 200 fewer students attending Xenia schools in five years. If we begin with 2012, the estimated decrease in the number of students attending our schools adds up to 430.

In a presentation to the Ohio School Boards Association, Randy Overbeck said, “the district enrollment has been fairly consistent over the past 15 years. ADM (average daily attendance) has remained around 4800-5100.” The school district estimated attendance to be 5,028 in 2012, 4,748 by 2013 and 4,548 by 2017, which figures are historically unprecedented.

The school’s 5 year budget forecast also assumes property and income tax revenue growth without a new levy. Actual property tax revenue was $17,092,007 in 2012. By 2017, property tax revenue is estimated to be $18,687,908. Income tax revenue estimates follows a similar trend. It grows from $3,197,402 to $3,239,094. While personal property taxes are still being phased out, the state was still reimbursing our school district over $2.9 million in 2012. It is estimated that the state will continue compensating our school district with over $1.8 million for the next 5 years. With the amount of personal property taxes still being collected, our school will continue receiving over $3 million, according to the budget forecast.

Of course, Xenia School District payroll expenses will continue to grow by 41.4 percent over 5 years. That is an annual increase of 8.3 percent, 90% of which covers insurance and retirement benefits. When the contracted services are included, payroll expenses increase to 54 percent, an annual increase of 10.8 percent.

Consequently, while the number of students served by Xenia Schools is estimated to significantly decline, Xenia taxpayers are expected to increase their tax burden to cover the presumed loss. If the decline turns out to be real, the school district revenue will certainly decrease because the state funding is based on daily average attendance.

There is a problem with Xenia school officials blaming the state funding formula for declining school attendance. It is even worse when they assume voters are dumb enough to believe that the nearly $4 million going to charter, STEM, and other nearby school districts is a real expense. It is not a real loss because the school district received revenue for those students to give to the school public school of their parents’ choice. How terrible it must be for families to have the freedom to choose how and where their children will be educated. Yet, the same school officials fail to inform the public about how much they receive from students from other districts enrolling and attending Xenia schools.

Xenia school officials are not loosing tax revenues because it was never theirs. Unlike county and state governments redistributing local tax money, it is unfortunate that Ohio law mandates the primary local school district to distribute tax dollars to other public schools like charters, STEM school, and now other nearby school districts.

Whether the estimated decrease of 200-430 students over the next 5 years is the supposed to be the result of families moving out of Xenia or attending other nearby schools is a question that is anyone’s guess.

What is not unknown is the ultimate goal of the proposed emergency property tax levy. That goal is same as identified in my last post about the school’s earned income tax levy. It is to increase cash flow so that school officials have an on-going year-end surplus of $5-6 million. The budget forecast estimates a $2 million surplus at the end of 2013 and $700,000 at the end of 2014. By that time, Romney may have been able to move the economy forward to a growing economy and 6% or less unemployment. Many more taxpayers would be making more money and would be able to afford giving schools $200 or more for five years and thereafter.

In the final analysis, Xenia School officials estimate a steady decline in student population, steady income revenue, and significantly rising costs. Most of the increased costs are due to above inflation employee benefits. Unless taxpayer annual income increases about 10-12 percent, Xenia taxpayers will not be able to afford the emergency property tax levy or any additional taxes. Based on the school’s estimates, the budget forecast is unsustainable. That is the bottom line.

Xenia School District Income Tax Replacement Levy Rejected by Voters

Xenia Community School District income tax replacement levy was rejected by voters. Almost 28 percent of voters, favored the proposed levy while 72 percent opposed it. As has been widely publicized, the current 1/2 percent income tax remains as one the school’s revenue sources. As projected by the District, a budget surplus in excess of $1.8 million is expected in fours or less.

Olympians’ Medals Taxed

By Emily Thompson

In my previous blog, Olympinomics I discussed the possible economic benefits of the London Olympics. However, I’ve now come across a possible costs of the Olympics specifically to American medalists. Upon coming back from London with many successes, our many decorated Olympians will be assessed taxes on their medals (each medal is individually taxed.) Yes, that’s the thanks they get for proudly representing our country in the Olympics. I can’t be the only person who finds this a bit ridiculous. For example, a gold medalist is taxed $8,896, a silver medalist owes Uncle Sam $5,385, and a bronze medalist is taxed $3,502. Allison Schmitt, who anchored the American 4×200 freestyle relay to a gold medal, now owes the government $26,679. That’s because she has already won two gold medals, a silver medal, and a bronze medal. Just imagine how much money in medal taxes Michael Phelps has paid the federal government through the years.

Being conservative, I’m always in favor of cutting taxes, and I think these taxes should not only be cut, but also eliminated. If you agree, don’t worry: Senator Marco Rubio introduced a bill on Wednesday proposing the elimination of these taxes. Basically, these taxes are taxing athletes for being talented. How in the world is that justified through the tax code? It’d be just like taxing the smartest or the prettiest people in America, instead we’re just taxing the most talented athletes.

Although the bill is one more step towards eliminating this policy, the more it’s known the more controversy it should cause. America shouldn’t be punishing its Olympians for representing our country with pride by winning medals; we should instead encourage our Olympians (and eliminate their taxes on medals.)

Emily Thompson is the author of the economically focused SouthernStyleMusings, where this article was originally posted. To read more of her “musings” go to http://southernstylemusings.wordpress.com

Passing Xenia Schools Income Tax Replacement Levy: The Bottom Line

By Daniel Downs

Xenia Community School officials want residents to agree with their plan to replace the current one-half percent income tax with a 1.5 earned income tax levy. The difference between the two is relatively simple. With the current income tax, earned compensation and unearned compensation is taxed. Earned compensation includes wages, salaries, commissions, tips, after-expenses business profits, and similar types of income. Unearned income consists of pensions, public assistance, unemployment, investment income, and similar types of income. With an earned income tax, only earned compensation is taxed.

Why do school officials want to replace the current income tax with an earned income tax? Is it to help the elderly on fixed incomes or the poor on public assistance? Do they make doing business in Xenia less costly? An earned income tax would benefit them all. However, the bottom line is not making taxation more equitable nor is to help the poor. The poor wage earner ends up with less money.

The bottom line is this: The proposed tax levy is the fast-track to a $6.4 million budget surplus in four years. Literally, this figure is the last line of the school district’s five year financial forecast. School officials apparently want to have about the same amount in the bank as they prior to the recession. In 2009, the school district had over $6 million in the bank. In 2008, the bank balance was over $5 million and $4 million in 2007. Without the new income tax levy the budget surplus is estimated to be $1.875 million in four years, which is a little less than the surplus balance reported in 2006.

Why do school officials want $6 million in the bank? One reason is state and federal banks pay interest. However, the interest usually is little more than the rate of inflation. Right now, the inflation rate is somewhere between 1-2 percent. Another reason is cash flow. Money collected from the earned income tax would get into the school district’s bank account much quicker than if another property tax was levied. Still another reason is that a fat bank account generates more money to spend with less stress. It must be stressful having to deal with increasing employee salaries and benefits as well as buying new buses, equipment, furniture, trips and other perks during a global recession.

The school district’s five year forecast appears to be based on the belief that the economy will have recovered to pre-recession levels of growth and productivity. That is not the case. No serious government economist, private sector economist or financial expert expects such a return by 2016. The Congressional Budget Office does not. Economist Nouriel Roubini sees more recessionary clouds in the American as well as global horizon. And, accountant and financial adviser Rob Clarfeld also cautions investors about the global recession.

Like many others, Congressional Budget Office economists estimate unemployment to still be 8 percent in 2015 and maybe 6.6 percent by 2016. However, it all depends on what the Europeans, U.S. Congress, and the newly elected president does. Many financial experts claim they are not actually fixing the housing, credit, and debt problems that created the economic crisis in the first place.

It should be remembered that the great depression lasted 10 years. During those years, the economy grew an annual average of a little over 1 percent with high unemployment. It looks like the liberals will achieve another 10 years of slow economic growth and high unemployment.

Again, the bottom line is that the school wants more money than it actually needs. Because of the economic uncertainty, giving the school officials all they want may prove to as problematic as two-story elementary schools. We just might get shoved down the stairs and loose all of our nickels and dimes.

If You Build It, They Paid for It

By Cameron Smith

President Obama recently noted that “[i]f you’ve been successful, you didn’t get there on your own.” But the President’s argument did not stop with the assertion that economic success fundamentally requires paying customers. Instead, the President essentially argued that the successful person somehow “owes” the government for the fact that he or she makes a good living.

For most businesses in America, making money is a fairly simple concept even if it is challenging to execute. In short, the business makes a product or provides a service that customers value more than the money in their pockets. As a result, the business profits and the customer receives something he or she values. But where is the government in that exchange?

The President argues that the business became successful in large part because of transportation infrastructure and an Internet created by the federal government. But this fundamentally begs the question of where the money for those projects came from.

Few will deny the utility of quality transportation infrastructure or the reach of the Internet, but the government did not generate the wealth that enabled those projects. While the Field of Dreams sentiment “if you build it, they will come” makes for great theater, it falls flat when applied to government action. A government’s resources simply do not exist outside the economy it taxes.

Unfortunately, the current revenue base of almost $2.5 trillion is not nearly enough grist for the Obama Administration’s political mill. In fact, the President’s most recent “budget” calls for an additional $1.3 trillion in debt. Stating that the wealthy need to pay a “little more” in order to trim federal deficits is such a serious understatement that it borders on falsehood.

In 2009, the last year for complete federal tax data, tax returns with an adjusted gross income of more than $200,000 incurred a total tax liability of almost $450 billion. Assuming that the President could increase the tax liability for these “wealthy” individuals by ten percent, the net gain to the federal government would be less than $50 billion, barely a drop in the bucket against what Washington is spending. In truth, President Obama would need to tax those with returns in excess of $200,000 at almost 50 percent of their total taxable income to trim even 25 percent of President Obama’s $1.4 trillion deficit in 2009.

It is little more than political theater to argue that there are some services and legitimate functions of government that most Americans have little trouble lending their consent or their tax dollars. The hard truth is that a government comprising almost 25 percent of America’s GDP needs major reforms … not just a little more cash.

Unfortunately, the President’s mantra reflects the powerful siren call of the collectivist rather than support of the time-tested free marketplace. The warm notion that “we are all in this together” conveniently leaves off the rest of the sentiment …”as long as you agree with me.” To paraphrase Austrian economist F.A. Hayek, the only thing worse than submitting to the uncertain outcomes and inequalities of a free market is submission to an equally uncontrollable and arbitrary power of other men. Americans can and must do better than simply give more control and send more money to Washington in an effort to solve the challenges facing the nation.

Cameron Smith is Policy Director and General Counsel for the Alabama Policy Institute, an independent, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.

ObamaCare Catch-22: Crushing Fines for Religious Entities in Mandate

By Bridget Johnson

Under President Obama’s healthcare law, the HHS can levy $100 per employee, per day against institutions that won’t comply with the mandate.

Therefore, religious employers with hundreds of employees could be fined millions of dollars each year. A 50-employee institution, for example, would face a penalty of $1,825,000 each year.
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“ObamaCare gives the federal government the tools to tax religiously affiliated schools, hospitals, universities and soup kitchens right out of existence,” said Rep. Jim Sensenbrenner (R-Wis.), sponsor of the Religious Freedom Tax Repeal Act. — Read More

Senator Rob Portman On Economic Recovery

U.S. Economy Undermined by Uncertainty

By Gary Palmer

Kevin Hassett, a senior fellow at the American Enterprise Institute, predicts that uncertainty about taxes and fiscal policy is likely to skyrocket by the end of this year. Hassett says the expiration of several tax cuts will result in significant pessimism about the American economy in the second half of 2012. This includes the tax cuts enacted during the Bush Administration, which are scheduled to expire December 31st.

From an individual/household perspective, allowing the cuts to expire will result in a tax increase of $494 billion in 2013, an unprecedented increase for one year. The average household tax bill will go up by $3,800 and will impact all income groups with middle- and low-income families hit the hardest. According to Curtis Dubay, a senior policy analyst with The Heritage Foundation, 70 percent of the increase will fall on middle- and low-income families. Dubay said, “That’s because 60 percent of the Bush tax cuts were for middle- and low-income taxpayers.”

The Washington Post called the looming tax increase “Taxmageddon,” and Federal Reserve Chairman Ben Bernanke described it as a “massive fiscal cliff.” Jim Capretta, a former official with the White House Office of Management and Budget, predicts that the tax increase will result in an economy that is “… about one to two percentage points smaller than it otherwise would have been, and unemployment that’s a full percentage point higher than it otherwise would have been.”

While there still is time for Congress to take action to prevent this massive tax increase, it is looking increasingly unlikely that it will. With the uncertainty almost $500 billion in new taxes, individuals and businesses are reluctant to make major purchases or investments. Thus, the fear of “Taxmageddon” is already having a negative impact on our economy as families and businesses wait to see what Congress is going to do.

Members of Congress surely know that uncertainty has a negative effect on the economy. If businesses can’t predict next year’s tax rate, they are unlikely to invest in new equipment or expansion or to hire more workers. Individuals and families are less likely to spend as much for the same reasons.

Adding to the uncertainty is the explosion of new federal regulations on American businesses. Since January 2009, federal agencies have issued 106 major regulations that cost $46 billion per year. In 2009 and 2010 alone, federal agencies issued 7,076 rules. The Small Business Administration estimates that the regulatory burden on the U.S. economy is now at $1.75 trillion, more than twice the amount of individual income taxes paid by American households.

Three economists, Scott R. Baker and Nicholas Bloom of Stanford University and Steve Davis of the University of Chicago, produced an index of policy-related economic uncertainty and estimated its relationship to economic activity including investment and employment. This uncertainty index surges around major federal elections; events such as 9/11, the war on terror, the Lehman bankruptcy, and the TARP bailout; and the debt ceiling dispute that foreshadowed declines in private investment, industrial production, and employment. Interestingly, the index also spiked during the debate over the stimulus package.

Since 2000, policy uncertainty has been higher, on average, than in the previous 15 years. The spikes caused last summer by the contentious battle over raising the debt ceiling and Standard & Poor’s downgrade of the U.S. bond rating created uncertainty that the creators of the index believe helps explain the slower growth of the U.S. economy.

With the $494 billion tax increase on the horizon, economy-draining new federal regulations forthcoming, another debt limit vote set for the end of this year, and the most consequential election in decades, the uncertainty index will spike again. When the index spikes, the economy will suffer and for good reason … people and businesses don’t risk their money when the government works against their interests.

Gary Palmer is president of the Alabama Policy Institute, a non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.