Ohio Economists split on impact of low-income tax cuts

In a survey released this morning by Scioto Analysis, economists were split on the question of whether tax cuts for the lowest income bracket in Ohio helped grow the State economy, with three economists agreeing, five disagreeing, and six who were uncertain. 

Jonathan Andreas from Bluffton University who agreed that these tax cuts contributed to growth wrote: “Because most other state taxes are somewhat regressive [with respect to] income, a progressive income tax just makes the overall tax burden fairly flat and there are theoretical reasons why somewhat progressive taxation should be more efficient for economic growth as long as wealthier people actually pay it rather than spending money on tax lawyers to evade it.”

In contrast, Paul Holmes from Ashland University wrote: “Given Ohio's (close to) balanced budget rule, the effect of decreasing taxes shouldn't be considered in isolation from the corresponding decrease in spending. Overall, I'd expect the effect to be minimal. Further, it seems unlikely that a reduction in taxes of a couple of percentage points would induce significant changes in labor supply. So overall I doubt this change had much effect on [gross state product].“

When asked if these tax cuts reduced revenues for the state, there was near consensus with 11 of 14 economists disagreeing. One reason pointed out by survey respondents was that low income people make up a small percentage of the overall state tax revenue. 

The Ohio Economic Experts Panel is a panel of over 40 Ohio Economists from over 30 Ohio higher educational institutions conducted by Scioto Analysis. The goal of the Ohio Economic Experts Panel is to promote better policy outcomes by providing policymakers, policy influencers, and the public with the informed opinions of Ohio’s leading economists. Individual responses to all surveys can be found here