An Idea Whose Time Has Come — Testifying on Criminal Intent

Nothing is more powerful than an idea whose time has come,” wrote Victor Hugo, in History of A Crime – published in 1877.

We could not agree more.

Buckeye’s President, Robert Alt, has been a longtime leader in defending Americans from becoming victims of hyperactive laws designed to criminalize ordinary behavior.  He previously taught criminal law at Case Western Reserve University School of Law in Cleveland, following which he led a successful project on the topic of over-criminalization while serving as a Director for former Attorney General Ed Meese in the Center for Legal and Judicial Studies at The Heritage Foundation in Washington, D.C.

It is, therefore, fitting that the issue of over-criminalization finally earned its day of hearings at Ohio’s Statehouse.  Indeed, Robert testified before the Ohio Senate Criminal Justice Committee earlier this week about this particular idea whose time has come, after many weeks working with leaders in the Ohio Senate.  This legislation would prevent Ohioans from unwittingly being criminalized for running afoul of unknown or arcane laws, and is long overdue.

In his testimony, Robert explained,

“The default rule in SB 361 seeks to assure that the traditional requirement of a culpable mind is present in each material element of an offense, except where the General Assembly plainly indicates that it wishes to dispense with the requirement.  In so doing, the language reduces the risk that Ohioans who are seeking to follow the rules may nonetheless run afoul of the criminal law without having a guilty mind.”

The bill cleared the committee earlier this morning.

To celebrate Buckeye’s testifying, we are sending out individual copies of the seminal book on over-criminalization published when Robert was at Heritage, One Nation Under Arrest, while supplies last.*

 

For any particularly cheapskate Buckeye Institute readers, holiday gift shopping for your in-laws can be completed without spending a dime — wrap up an education on the issue of over-criminalization, compliments of The Buckeye Institute!

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Labor Force Nearly Repeats Last Month’s Record Gain, Private Sector Added 8,400 Jobs

The latest Ohio by the Numbers report (now available on The Buckeye Institute’s website) shows that Ohio’s economy gained 1,000 non-farm jobs during October.  The addition of 8,400 private sector jobs more than offset the loss of 7,400 jobs in the government sector.

Ohio’s unemployment rate dropped from 5.6 percent in September to 5.3 percent in October-a solid decline that went hand-in-hand with an unusually large rise of more than 10,000 workers in Ohio’s labor force.  However, Ohio’s labor force is still down 25,000 workers since the beginning of 2014.  And although the state’s labor force participation rate ticked up slightly in October, rising to 62.9 percent, it is still down 0.6 percent since October 2013.

October marks the second consecutive month of a declining unemployment rate combined with a growing labor force.  Although two months do not make a trend, they may offer a promising sign of a more robust economic rebound ahead-a rebound the state desperately needs as its private sector job growth rate ranks only 29th nationally since 2010 (7.8 percent) and 47th since 1990 (10.2 percent).

Highlights from the report include:

  • Ohio gained 8,400 private sector and shed 7,400 total government jobs in October;
  • Ohio’s unemployment rate dipped markedly to 5.3 percent;
  • Ohio ranked 29th nationally in private sector job growth since January 2010, increasing 7.8 percent;
  • Ohio currently ranks 47th nationally for private sector job growth since January of 1990, increasing 10.2 percent (top-ranked North Dakota grew 100.3 percent during the same time span).

For the full report, please click here.

For the full labor force update, click here.

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Lame Duck Legislation, Not Necessarily Fishy or Fowl

Columbus is currently abuzz with the “lame duck.”  By all accounts, the origin of the phrase “lame duck” is 18th century London.  It referred to, quite literally, a duck who could not keep up with the rest of the ducks in its flock.  It was then quickly adapted to work as an insult used to describe a person who didn’t make good on his debts.

Having crossed the pond and arrived in common usage in the United States over the next few centuries, it now ironically refers to the period following an election when those who have lost their elections, been term-limited out of office, or opted not to seek re-election nonetheless have a final chance to make an impact on legislation before the newly-elected replacements are sworn into service.

As Ohio’s General Assembly works through its lame duck session for a final push, one of the most important pieces of legislation it will consider is the completely un-sexy, but desperately necessary, reform of Ohio’s broken municipal income tax system.

Ohio’s municipal income tax system is the ”most complicated, absurd, and punitive” in the country.  It is a primary reason that Ohio ranks 44th (that’s right, 6th from the bottom!) in the Tax Foundation’s 2015 state business tax index.  Thinking back to the origin of the phrase in jolly old England, the real lame duck here is our municipal income tax system.

Strong medicine is necessary, with bold changes required to get our state back on track to compete with the rest of the strong and healthy ducks who surround Ohio.  Buckeye’s policy analyst, Greg R. Lawson, recently published a report and offered legislative testimony suggesting improvements to the current municipal income tax bill that underscore the need to make Ohio’s municipal income tax system ”simpler, more uniform, and more equitable for small businesses.”

Lame duck sessions are notorious for producing bills that host all kinds of special interest goodie giveaways that don’t redound to taxpayers’ benefit.  This time, let’s work together to keep the General Assembly focused on healing the lame duck municipal income tax system so it can keep up with the rest of the ducks who are flying ahead of us and leaving us behind in Ohio.

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More Must be Done for Real Municipal Income Tax Reform

Forty of the fifty states have NO municipal income tax.

Not only is Ohio saddled with a municipal income tax, but ours is among the “most complicated, absurd, and punitive” local tax system in the nation, according to numerous experts.

As Ohio’s General Assembly starts reforming this broken tax system, The Buckeye Institute has released a new report, More Must be Done for Real Municipal Income Tax Reform, to underscore the bare minimum any proposed legislation should do:

  • Standardize reciprocal municipal income tax credits across jurisdictions for tax fairness;
  • Allow for an eventual 20-year Net Operating Loss Carryforward to facilitate start-up business formation;
  • Use a simple “bright-line” residency test that taxes non-residents based on their primary place of employment;
  • Set a higher threshold for filing a net profit return (which is currently set at $10) to avoid having taxpayers spending more to file than they owe in tax liability;
  • Require a simple form for businesses to declare that they conducted no business in a specific municipality and therefore did not need to file a complete tax return for that municipality;
  • Include a “Taxpayer Bill of Rights.”

Buckeye report author Greg R. Lawson stated, “The recommendations in this report represent commonsense reforms focused on making Ohio’s municipal tax system simpler, fairer, and more uniform for individuals and small businesses.”  Lawson continued, “These requirements are the least we should do, particularly given Ohio’s competitive disadvantage relative to other states of having municipal income tax in the first place.”

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Labor Force Sees Biggest Increase of the Year, Private Sector Up 3,000 Jobs 

The latest Ohio By the Numbers report shows that Ohio’s private sector economy saw modest improvement in September, picking up 3,000 jobs. Meanwhile, the government sector also added 3,000 jobs. However, local governments lost 3,400 jobs in September, partially offsetting the large unadjusted gains seen in August. Year over year, local government employment is up by 1,000 jobs since September 2013.

The unemployment rate ticked down to 5.6 percent from 5.7 percent in August. This small decline in the unemployment rate coincided with particularly large growth in Ohio’s labor force–over 11,000 people were added to the labor force. Unless this figure is subsequently revised substantially downward, the gain in September will stand as the largest one-month labor force gain since well before the Great Recession in October 2006. It also put an end to five straight months of decline in the labor force. Despite this gain, Ohio’s labor force is still down 31,000 people since the beginning of 2014.

Though it is only one month, the declining unemployment rate combined with the increasing labor force indicates that the economy could be picking up steam as people re-enter the labor force and find jobs.

Overall highlights from the report:

  • Ohio gained 3,000 private sector and 3,000 total government jobs in September;
  • Ohio’s unemployment rate dipped slightly to 5.6 percent;
  • Ohio ranked 28th nationally in private sector job growth since January 2010, increasing 7.5 percent;
  • Ohio currently ranks 47th nationally with a 10 percent growth in private sector jobs since January of 1990 (top-ranked Nevada grew 99 percent during the same time span).

For the full report, please click here.

For the full labor force update, click here.

 

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Ohio Business Tax Climate Ranks Poorly in New Tax Foundation Study

With the release of the non-partisan Tax Foundation’s 2015 Business Tax Climate report, a massive spotlight is being shined on the imperative for further, major reform in Ohio. Unfortunately, what shows up under the glaring light at the moment is not pretty.  Ohio ranks an uninspiring 44th in the nation.

It is important to note that this ranking does not focus only on rates. It attempts to examine qualitatively the complexity and interaction of the multiplicity of different taxes that impact businesses in the state. Consequently, while Ohio has been making steady improvement with respect to the lowering of the state income tax rates, the overarching tax system still runs afoul of a variety of sound tax principles such as: fairness, simplicity, and transparency. These violations are a major contributor to the fact that Ohio has, for decades, had more sluggish economic growth than the nation as a whole.

The report essentially analyzes five different types of taxes that states levy on businesses: 1) corporate income, 2) income, 3) sales, 4) unemployment compensation, and 5) property.

In Ohio’s case, two taxes stand out as particularly bad. First, Ohio is one of only 10 states that levy a local tax on both personal and business income. As we have stated previously in Forbes and the Columbus Dispatch, this tax is the most byzantine and absurd tax in the entire nation. It penalizes individuals and, especially, small, start-up businesses. It can make contractors file literally hundreds of W-2s, often spending more in filing costs than the amount actually owed in tax liability. It also does not include standard reciprocal credits between cities where work is performed and cities that act as a place of residence. This frequently leads to the fundamentally unfair situation where an individual is taxed twice on the income that they earn. Additionally, there are no standard net-operating loss carryforwards. These are indispensable for new businesses that might struggle turning a profit in their first few years of existence. Indeed, Ohio ranks poorly in measures of health for entrepreneurial businesses. According to a recent study by the University of Nebraska, Ohio ranked 42 out of the 50 states in its entrepreneurial index.

A watered down package of municipal income tax reform appears to be potentially ready to move in the post-election lame duck session. Even if it passes, the marginal improvements it contains will still not level the playing field for Ohio when compared to the 40 states that do not levy this form of tax. Rather, Ohioans will still be subjected to a municipal income tax that is not fair, not simple, and not transparent.

The second tax which hurts Ohio’s ranking in the study is the Commercial Activities Tax or CAT. This tax was implemented in the mid 2000s as part of a package that was designed to lower the personal income tax rate and to phase-out the particularly burdensome tangible personal property tax. That tax typically hit Ohio’s manufacturing sector hard. However, in order to alleviate that burden, the CAT shifted the burden from large-scale manufacturers to all businesses in the state. As a gross receipt tax, the CAT is levied irrespective of the profitability of a business. This means that many high volume businesses that have low profit margins are particularly negatively impacted. They pay the tax whether they make a profit or not. The Tax Foundation report also points out that while the CAT acts in lieu of a corporate income tax, it is still applied to limited liability companies and pass-through entities that are usually taxed through the income tax as well. This can severely limit their ability to experience growth.

Overall, Ohio needs to have a large-scale discussion over its whole tax system. While reducing, flattening, and eventually eliminating the state income tax is a worthy goal, other Gordian knots will have to be untied as well in order for Ohio to reap the benefits of a truly sound, tax system. The new Tax Foundation study should be mandatory reading for all Ohio policymakers. The ability of Ohio to finally shed its half-century of underperformance in job growth hangs in the balance.

 

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Medicaid Expansion: More Spending Will Lead to More Taxes

Proponents of Medicaid expansion, including Ohio’s Governor John Kasich, have suggested recently that “[t]he opposition to [Medicaid expansion] was really either political or ideological,” and have claimed that expanding Medicaid has nothing to do with ObamaCare.

As the leading opponent of Medicaid expansion in Ohio, The Buckeye Institute’s opposition-as our latest blog explains-does not stem from politics or ideology, but is rooted in our concern for sound public policy.

Medicaid expansion was bad policy last year, it remains bad policy this year, and it will continue to be bad policy with rising and unforeseen long-term costs for years to come.  As we have argued:

“[Expanding Medicaid] places unsustainable financial liabilities on future taxpayers. It will provide an additional burden to a labor market that has already been reeling in Ohio, doing long-term damage to the economy and compounding the expansion’s direct impacts to the state budget. We have also pointed out that this economic sacrifice is for a program that has not proven to be able to obtain significantly better health outcomes for most recipients and fails to provide a real saving grace to the most vulnerable.”

Further, to suggest that the Medicaid expansion is somehow distinct from ObamaCare is simply not accurate.  The Heritage Foundation revealed this week that nearly 71% of individuals receiving coverage under ObamaCare are getting it through the expanded Medicaid program.  The Medicaid expansion was a key component of ObamaCare and the Obama Administration’s so-called healthcare reform initiative, and to suggest otherwise borders on the disingenuous.

Even more misleading is the revisionist claim that expanding Medicaid extends President Reagan’s legacy.  Former Reagan Attorney General, Ed Meese, and the Buckeye Institute’s president, Robert Alt, set the record straight last year in an article for National Review:

“Reagan cut through irrational federal regulations to allow children to live with their parents, where they could receive care that would cost the taxpayer one-sixth as much as institutional care. By contrast, Obamacare has added thousands of pages of bureaucratic regulations and will cost the federal government untold billions.”

Next year, the Medicaid expansion will have to be re-authorized, and Ohio leaders should take a hard look at their ill-advised expansion-a move that, so far, has led to more than 400,000 new enrollees-that is already 12% above expectations for the middle of next year.  As enrollment continues to escalate, so will the costs, especially as the state assumes its share of the burden required by Obamacare.  And if the federal matching rate changes, these costs could rise exponentially.

Rea Hederman, our Executive Vice President, reminded us in a recent interview of at least one serious danger tied to these rising costs:

“Remember that all government spending ultimately results in taxation. If Ohio continues Medicaid expansion, that means higher taxes on citizens of Ohio to pay for Medicaid expansion at the federal and state level.”

Ohio’s policymakers cannot hide from that ominous but fundamental fact, and they should not hide behind misleading rhetoric, name-calling, or a revisionist rewriting of history to prop-up bad policy decisions.  The expansion of Medicaid under ObamaCare was bad policy for Ohio when it was enacted, and it is bad for Ohio today.  The Buckeye Institute will continue to oppose bad policy-precisely because it is bad policy-as we work for a better tomorrow.

To support our continuing efforts to educate the public, opinion leaders and policymakers on good, free market public policy, please consider contributing to the cause.

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