Tag Archives: Tax Foundation

What S&P Credit Rating Means for Ohio

While the S&P downgraded the federal government’s rating from AAA to AA+ negative, it upgraded Ohio’s AA+ negative rating to AA+ stable. Several reasons noted in the S&P report were Ohio’s recent budget reforms that closed the $8 billion shortfall without raising new taxes, continued economic recovery, and significant reduction in Ohio’s unemployment, according to the Wall Street Journal.

Gov. Kaisch’s unpopular fiscal manuvering is paying off.

Ohio is one of thirteen states given a AA+ credit rating by S&P. What do these ratings mean for Ohio? On the negative side of the ledger, Ohio is not among the twelve states with the strongest economies (acknowledged by S&P’s AAA credit rating) and therefore is not among the best places to invest. On the positive side, Ohio is among thirteen of the second best states in which to invest and develop business. Because credit worthiness equates to level of risk, Ohio is among states with the second lowest level of risk to investors and lenders. As WSJ noted, the improved credit rating also will reduce the cost of borrowing throughout the state. It may even attract attention of entrepreneurs to Ohio’s improving business environment.

The other twenty-five states in the Tax Foundation analysis pose greater credit risks and indicate less potential for economic growth, less ability to pay current and future debt, and consequently less attractive places to invest, for example less attractive to new business start-ups.

The key to economic stability and growth is sound fiscal management. When tempered by sound moral principles, prosperous political economy will result in the financial well-being of all citizens. The moral aspect of the political economy of states is usually overlooked in economic analysis. It certainly is not a factor in a state’s credit rating, but maybe it should.

U.S. Tax System Ranks Poorly on PWC’s Paying Taxes 2011 Report

by Scott A. Hodge, Tax Foundation

Were the U.S. to get its own headline from the recently released Paying Taxes 2011 – a joint product of PriceWaterhouseCoopers, the World Bank, and the International Finance Corporation – it would be “The U.S.: where it is moderately easy to pay relatively high corporate taxes.”

That is hardly the kind of marketing slogan that will bring investors flocking to do business in the U.S.

The report ranks 183 economies on the compliance and tax burden faced by a standard firm with 60 employees. The compliance burden is broken down into three indicators: the ease of paying taxes; the number of tax payments a firm must make; and the time it takes the firm to comply. The tax burden (called the Total Tax Rate TTR) measures the percentage of profits going to pay not only the income tax, but any sales taxes, labor taxes, and mandatory contributions a firm might pay.

When it comes to the ease of paying corporate taxes and the time it takes to comply with them, the U.S. ranks 62nd and 66th respectively out of the 183 economies. Not terrible, but not great either. By contrast, Canada ranks 10th best in ease of paying and 34th best in the amount of time wasted. The U.S. does rank a bit better (35th) when it comes to the number of tax payments a firm must make. Canada, however, ranks 15th.

The U.S.’s Total Tax Rate of 48.8 percent gives it a below-average ranking of 124th. The world average TTR was 47.8 percent while the average rate among EU countries was 44.2 percent. Closer to home, Canada ranked 37th overall, with a TTR of 29.2 percent.

The factor that boosts the U.S.’s TTR the most is our profits tax, which totals 27.6 percent of profits. In Canada, by contrast, the effective tax rate on profits is 9.8 percent, whereas in France the rate is 8.2 percent, in Germany 22.9 percent, and in the United Kingdom it is 23.2 percent.

The current talk of fundamental tax reform, especially cutting the U.S. corporate tax rate, is a welcome sign of the growing recognition that our tax system is undermining our global competitiveness. Hopefully, the talk will soon turn to action.

If Democrat’s Health Surtax Is 5.4 Percent, Taxpayers in Ohio would be among 39 States That Would Pay a Top Tax Rate Over 50%

By TF Staff

New taxes to fund the federal government’s plan for higher health insurance spending continue to be debated in Washington. According to a new Bloomberg report, the top surtax rate will be 5.4 percent in the House plan. That will be the top rate in a three-tiered surtax aimed at high-income tax returns:

1 percent surtax on AGI between $350,000 and $500,000 (singles between $280,000 and $400,000)

1.5 percent surtax on AGI between $500,000 and $1,000,000 (singles between $400,000 and $800,000)

5.4 percent surtax on AGI beyond $1,000,000 (singles beyond $800,000)

States have been raising taxes on this same group, leading to concern over how high the combined tax rates would be in each state, especially in the growing number of states with double-digit tax rates. Some commentators merely sum the rates at the federal, state and local level to give a statutory total tax rate. A more accurate method is to calculate the effective marginal tax rate, which takes into consideration deductions and adjustments. For a description of the difference between effective marginal tax rates and effective average tax rates, see Average vs. Marginal Tax Rates Revisited.

In Table 1 below we present calculations of the effective marginal tax rate on top earners. We use assume that the 2008 weighted local average for each state applies to 2011, the top federal taxable income rate will rise as scheduled to 39.6 percent, the top state tax rate in each state will follow current 2011 scheduled law, and a new House plan for 5.4 percent surtax on AGI earned at very high-income levels will become law.

Table 1 (Ohio)

Top Effective Marginal Rates under Proposed Health Care Surtax by State

Sorted by Combined Top Tax Rate in 2011


Avg. Local Rate

State Rate (2011)

Top Federal Ordinary Rate



Top Rate










To see rankings of other states, go to the Tax Foundation website.


Taxing the rich to pay for free health care is an ploy of the rich and powerful to rob the non-rich of both their freedom and their income. Anyone familiar with Roman history will recognized the strategy. The Roman imperialists tax the nations of the world to pay for their big agendas. Caesar and the Roman Senate taxed the wealthy elites of the respective states. In turn, leaders like Herod increased local taxes on productive peasants. In order to pay, many had to borrow money. When misfortune rendered them unable to pay it back, their land was confiscated. Most were allowed to continue farming the same land as long as they gave Rome via Herod or some other member of the rich elite the required amount, usually over 50 percent.

What this means under the Democrats’ taxing scheme is this: we peasants will end up paying for the huge tax increases of the rich in inflationary costs for products and services. In fact, I recently listened to what Canadians and British people have experienced under universal health care. They have had to endure long waiting lists for care and large increases in overall cost for their health care.

In every respect, universal health care is much more costly than market based care. The highest price for socialist medicine is dying while waiting to receive the promised health care.

One woman with brain cancer was able to come to the Mayo Clinic in America to get the necessary cancer treatment. That is she is suing her government. Had she waited she certainly would have died.

Americans who love the right to life as well as true liberty does not need Democrats’ impoverishing programs or their deadly health care.