Predictions of Doom Caused by Tax Relief Measures Ring Hollow

Published October 24, 2014

Many years ago, the Chinese philosopher Lao Tzu opined, “Those who have knowledge, don’t predict. Those who predict, don’t have knowledge.”

He was most likely observing human behavior in the aggregate, but local government officials who fought against tax relief measures for the state’s Local Government Fund (LGF) subsidies would be wise to heed Lao Tzu’s words in the future.

In 2011, numerous local-government special-interest groups and elected officials fought against Gov. John Kasich’s proposed reduction to the Local Government Fund, a pool of taxpayers’ money collected by the state government and redistributed to local governments’ general revenue funds.

The LGF, created by Gov. George White, was born with great fanfare and pomp. Writing of his plan to enact a 3 percent sales tax in Ohio, White proclaimed forcing taxpayers to subsidize communities in which they did not reside would save the state—and the hundreds of municipalities within it—”from bankruptcy and chaos.” Not one to set a low bar for expectations for “spreading the wealth around,” White announced his plan would allow him a peaceful slumber: “I know now that the poor will be fed and clothed and our children given the opportunity of a free education which is the birthright of every American school child and that the safety and health of our people will be guaranteed.”

In 2011, when Kasich and legislators began cutting the LGF, numerous municipalities began ringing the alarm, forecasting the return of White’s predicted “bankruptcy and chaos” should their access to other people’s money be restricted at all. Circleville Mayor Chuck Taylor told the Columbus Dispatch his city’s budget already had been “cut to the bone,” complaining, “It’s going to be devastating to us, to be honest.”

Ohio Sen. Capri Cafaro (D-Hubbard) bemoaned the 5.3 percent cut in subsidies, warning, “the state is creating a fiscal crisis for local governments that will likely lead to tax increases, reduced services and additional layoffs.”

After local governments have spent three years without their fire-hose access to money extracted from other communities’ workers, the predicted apocalypse has failed to appear.

Recent studies of Ohio municipalities’ financial status have confirmed the world has not ended. A groundbreaking, comprehensive database compiled by ace Gannett Media reporters Chrissie Thompson, Jessie Balmert, and Jona Ison showed “counties and cities are largely weathering cuts in state money.” In fact, they note municipalities are actually exceeding state minimums for “rainy-day funds.” Clearly, the sun is shining on local governments’ budget sheets.

A parallel study, conducted by the Buckeye Institute for Public Policy Solutions, found local government tax revenues have increased by $310 million since the state slowed its subsidization of local governments. Confirming Gannett Media’s deep-dive, the Buckeye Institute study found 90 percent of all county governments are running budget surpluses, saving unassigned general revenue funds for possible leaner times ahead.

A general fear of the future—the “undiscovered country,” as Shakespeare called it—is understandable, but the hysteria over LGF subsidy cuts and the resulting relief for the state’s taxpayers has clearly proven unwarranted. Should future sessions of the General Assembly decide on further relief of the taxpayer burden, the predictable prognostications of peril from our elected officials and their surrounding nebula of pro-taxation policy advisors will have less credibility than ever.