Ohio tax burden rank improves

Who pays the highest residential property taxes in the region? Who pays the least?

The Dayton Daily News, working with county auditors in Greene, Miami and Montgomery counties, took an in-depth look at the numbers to determine which cities, villages and townships have the highest and lowest property tax burdens.

The answers will revealed in Sunday’s Dayton Daily News.

Ohio’s national ranking for state and local tax burden on its residents has improved steadily in the past decade, reaching its best level in 16 years in fiscal year 2010.

Residents paid an average of 9.7 percent of their income to state and local taxes in 2010. That rate ranked Ohio No. 20 nationally, according to a report released this week by the Tax Foundation, which calls itself a non-partisan tax research group based in Washington, D.C.

Ohio ranked as high as No. 7 in 2005. Its tax burden rate decreased from 10.6 percent that year to 9.7 percent in 2010.

The Tax Foundation said it considers taxes incurred in other states, such as while traveling or owning property in other states, while forming its rates and rankings. The think tank’s economists said the tax burden can potentially be a factor when residents decide where to move.

“There’s no other way to look at it than to say it’s good that it’s going down,” said Greg R. Lawson, policy analyst at the Buckeye Institute, a conservative-leaning think tank. “We’re seeing a positive trend, but there’s a lot more to be done. (Rank No.) 20 is better than seven, but 20 is still in the top half (in tax burden).”

According to the Tax Foundation, Ohio residents paid an average of $2,720 in Ohio state and local taxes in 2010 and $843 to other states. The total of $3,563 was divided by the average income of $36,694 to produce the tax burden rate. Ohio ranked No. 33 nationally in average income.

The national average tax burden in 2010 was 9.9 percent. New York faced the highest burden, at 12.8 percent, while Alaskans enjoyed the lowest burden, at 7 percent.

A spokesman for Gov. John Kasich said Ohio’s improvement had more to do with poor economic conditions than tax decisions and that the state has worked to improve tax conditions for residents.

“Unfortunately, Ohio’s ranking dropped not because we were becoming more business-friendly, but because the economy was tanking and incomes were falling, which meant less money was collected in the form of taxes,” said Rob Nichols, a Kasich spokesperson. “The good news now is that under Gov. Kasich and this legislature, we’ve been able to eliminate the death tax, cut the state income tax and help create the jobs-friendly environment Ohio needs to get back on track.”

The Tax Foundation said it produces the annual survey to provide a look at what residents face in taxes beyond what states and municipalities collect.

“By focusing on the taxpayer and the amount taxpayers must pay, this goes beyond simply the tax rate in one state,” said Tax Foundation economist Elizabeth Malm.

Ohio’s state and local burden used to rank much better. In 1977, the burden of 8.9 percent was No. 40 nationally, but Ohio rocketed to No. 7 in 2005.

From 2005 to 2010, the average state and local taxes paid by Ohio residents dropped 4.8 percent while the average income rose 4.2 percent, according to the Tax Foundation data. But some questioned the importance of such an improvement in the rankings.

“The fundamental point is that tax levels are not the main thing that determines how well a state does or how many are employed or what incomes are,” said Zach Schiller, research director for Cleveland-based Policy Matters Ohio, a liberal-leaning think tank that studies tax policy. “So giving credence to (the Tax Foundation report) is pretty erroneous.”

Some pointed to the Tax Foundation’s recent release of a report on business tax climates throughout the country as more significant. In that report, released Oct. 9, Ohio ranked No. 39 in state business tax climate, or 12th-least favorable to businesses.

Malm, of the Tax Foundation, said both reports could be used as indicators in welcoming new residents or businesses.

“I would argue that when making a business decision, a tax collection is a cost just like any other,” she said. “It would be considered when they decide where to locate. The same would go for an individual.”

Several researchers said a major tax cut passed by the Ohio General Assembly in 2005 aided Ohio’s tax burden ranking. Lawson, of the Buckeye Institute, said the elimination of Ohio’s estate tax next year could help the state’s ranking in the future.

But, Lawson said, the relative speed at which Ohio jumped in the tax burden rankings from No. 40 in 1977 to No. 7 in 2005 is worth noting. Even though Ohio has since improved and the Tax Foundation considers more than just a state or municipality tax rate in its rankings, he said that policy decisions can quickly change residents’ tax commitments.

“That (rise from No. 40 to No. 7) happened in a generation, or even less than a generation,” Lawson said. “That was a pretty dramatic move, and now we’re seeing a more positive trend.”