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Why is Ohio on verge of population decline?

Greg R. Lawson Jan 06, 2013

If each state in America is its own laboratory of democracy in action, there are numerous states that Ohio might want to consider emulating. Those are states that are seeing their populations grow and their private economies expand. By contrast, Ohio lost two Congressional seats after the 2010 Census and has lost eight since the 1960s. Sadly, the trend looks set to continue as Ohio persists in lagging most other states in the country in terms of population growth.

According to a recent Dayton Daily News story, Ohio’s population grew a paltry 3,218 from July 1, 2011 to July 1, 2012. That is a .03 percent increase and is another reminder of the long decline of Ohio’s relative economic position nationally. According to the U.S. Census, Ohio had the third worst population growth rate in the nation between 2000 and 2012, growing at only 1.59 percent, or under 181 thousand residents. This comes on the heels of the fact that Ohio is already suffering a real brain drain as its youth population has already been declining. According to the 2010 Census, Ohio’s under 18 population declined nearly 158 thousand.

This cannot be a surprise given that Ohio lost over 614,000 private sector jobs from 2000-2010, the second highest number of any state. In fact, only Michigan lost more with over 700,000 private sector jobs lost, and Michigan was also the only state to actually lose population during the 2000-2012 timeframe.

As our Ohio by the Numbers shows, even during the “golden years” of the 1990s when the economy was booming by most standards, Ohio was growing far below the national average. In fact, its private sector job growth rate of 17 percent was only good enough to clock in at number 38 nationally. By contrast, the top state in the country, Nevada, grew 66 percent.

While Ohio has seen serious improvements over the past couple of years in terms of private sector job growth, ranking 17 since January of 2010 with nearly 209,000 net jobs, it is going to take serious reform for Ohio to climb out of the hole its in and to attract businesses that create jobs and potential residents evaluating their economic prospects.

So is there anything fast population growing states are doing differently? Yes.

The top five states for population growth between 2000 and 2012 are all Right-to-Work states (Nevada, Utah, Arizona, Texas and Idaho). Additionally, these are states that have kept their total tax burden in reasonable order. According to the non-partisan Tax Foundation, in 2010 all five of the top population growing states had a combined state and local tax burden that ranked them in the bottom half of combined state and local tax burden. Three of them: Texas, Nevada, and Arizona- were in the bottom 10. By contrast, the five states with the worst population growth rates were all in the top 20 for highest combined state and local tax burden.

It should be pointed out that Ohio has been improving its comparative position regarding tax burden. As recently as 2005, Ohio ranked as the seventh highest combined tax burden in the nation compared to only twentieth in 2010 according to the non-partisan Tax Foundation. This was after significant tax reform, including a 21 percent personal income tax cut initiated by former Governor Taft that was frozen by Governor Strickland and then allowed to fully phase in by Governor Kasich.

However, Ohio still has a complex, multiple bracket income tax that could stand further reform, or better yet, elimination. We also simply cannot ignore the fact that according to the Ohio Department of Taxation, we have the sixth highest local tax burden as a percentage of income in the nation. Not only do we have local property taxes, we have local sales and, most problematic, local income taxes! Staggeringly, we have the second largest number of municipal income taxing entities in the nation at 593 and we also have 181 school districts that can levy income taxes as well.

Here is the bottom line: while there is a myriad of reasons that play into migration patterns within the United States, labor freedom and taxes are key. People are voting with their feet and they are choosing states that embrace workplace freedom and relatively low state and local tax burdens.

Ohio is improving, but it remains to be seen if it can improve fast enough to get back into the game and compete with other states on a sustained basis. In this sense, Ohio remains an ongoing experiment of democracy in action: will it embrace a freedom agenda that will unshackle small businesses and incentivize other businesses in America to give Ohio a more favorable look? Or will it slip back into a complacency that has pushed it to the bottom of the pack of states with population growth and economic opportunity?