State (& Local) Tax Revenue Decline : A Perspective

By Daniel Downs

A new state revenue report by the Tax Foundation came our yesterday. The report entitled “State Revenue Changes from 2008 to 2009” reveals Ohio tax revenues declined 8.7 percent the period assessed. Ohio ranked 28 which amounted to 2/10 of a percent below the national average of 8.9 percent.

Alaska suffered the highest percent of revenue decline at 51.9 percent. The next highest was Arizona at 19.7 percent, followed by California at 15 percent, and then Idaho at 14.1 percent. The state with the highest percent of tax revenue gain was Wyoming at 13.9 percent, followed by North Dakota at 4.3 percent, and then by Oregon at 1.9 percent.

The report also broke out the tax revenue losses by tax category i.e., property tax, individual income tax, corporate income tax, general sales tax, and selective other taxes. Ohio didn’t report property taxes collected. However, the report did show that the greatest loss of tax revenue in Ohio originated from corporate income declines. The percent of corporate income tax revenue decline was 36.6 percent, whereas individual income tax revenue decline only 16.8 percent. Sales tax revenue declined a mere 7.1 percent.

The high level of corporate income tax loss is due to the closing of both large and small businesses throughout the Ohio as a result of the great recession. Both greedy investors and power-mongering politicians must be thanked for the losses.

As mentioned in previous posts, the loss of tax revenues by Ohio government came after consistent increases in tax revenue and increased spending. The report brings this out very clearly in its historical statistics. When those national statistics are added up, the total percent of tax revenue increase was 19.7 percent, that is the total average increase for the nation from 2000 through 2007. The total decline from 2008 through 2009 was 9.2 percent.

The last paragraph of the report puts these above figures in proper perspective:

“Although state tax revenue decreased significantly during fiscal year 2009, the decrease is almost exactly matched by earlier years of major increases. Over the last decade, adjusting for inflation, state tax revenues have increased by 6.1 percent. When controlling for population, tax revenues are down about one percent.”

Like Xenia, many local communities are getting less money from the State because of the decline in tax revenues collected. As the report indicates, the real loss is only about 1 percent. That is why during times such as these taxpayers should not allow government officials to raise taxes to cover short-term fiscal problems is wrong. it is simply wrong to fix short-term financial problems with permanent taxes. The right thing is to assure that public officials practice fiscal and budgetary restraint. If necessary, they can always dip into the million dollar plus reserve fund until the economy actually recovers.

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