Shifting the Cost of Government
You have to keep your eyes on politicians. They are always looking for new ways to tax you. Their latest scheme is called the "earned income tax," and its design is almost ingenious in its trickiness. Knowing that most people enjoy government benefits better if they do not have to pay for them, this tax targets only a certain segment of the population to pay for services used by all. While this design may make the tax more likely to be approved, voters need to be wary of the idea that you can get something for nothing.
The earned income tax was approved by the General Assembly in 2005 for use by school districts. Ohio is one of the few states that allows school districts to tax incomes to raise money for things such as new buildings. Previously, school districts were only able to levy income taxes that covered all sources of income as taxed by the state income tax. But with the earned income tax, only self-employment and earned income is taxed. The result is that a large number of school district residents whose income comes from investments, pensions, welfare benefits, and other sources do not pay the tax.
Raising taxes to pay for new school construction is often a losing proposition in Ohio. By narrowing the type of income hit by a tax, however, school districts can appeal to the notion of "something for nothing." After all, if many people in the district (perhaps the majority) are not going to be affected by such a tax, the opposition to it is reduced.
Unfortunately, in the quest to increase support for such a tax, principles of fairness were discarded. To pay for benefits enjoyed by all, taxes should be levied on everyone, not just a select few. Why should only a handful of people pay for widely used government services?
Of course, schools are not widely used by most people. Many retirees, for instance, do not have children who attend them. Isn't it unfair that they are exempted from paying taxes to fund education?
Perhaps it is. But we do not pay for education through user fees. Taxes that are paid by everyone - whether or not they have children - fund schools. And if that is the case, these taxes need to be levied across a wide spectrum of taxpayers. By doing this the tax rate will be lower and an increased number of those who benefit from the new spending will pay their fair share.
The idea to target only certain members of society for higher taxes is widespread. You see it often in the calls to increase cigarette or tobacco taxes, for instance. Politicians love to spend tax money, but they want to concentrate the pain of raising it on the smallest group possible.
Government at all levels - federal, state, and local - is growing increasingly larger. By paying for that government through taxes on only certain segments of the population, politicians can blunt some of the opposition to this growth. If these services are really desired by citizens, though, all who benefit should share the burden.
The Milton Union School District may indeed need a new school. It is certainly true that as school buildings age or enrollment increases there is a need to build new education facilities. But an earned income tax is a poor way to pay for it. A large number of voters will be unaffected by a tax. They cannot truly weigh the possible benefits that they will receive compared with the cost of the new building.
Politicians need to be honest and levy taxes so that voters can truly appreciate the cost of the taxes against the benefits received by new spending. If a new school is truly needed, taxpayers should be willing to bear the cost. If it is not, however, then politicians should not be trying to trick voters into approving it by shifting the cost to only a small segment of school district taxpayers.
Marc Kilmer is a policy analyst with the Buckeye Institute for Public Policy Solutions, a research and educational institute located in Columbus, Ohio.
