Horse and Buggy Tax Structure Holding Ohio Back

Do you shop where you live?

It turns out that most Ohioans do a fair amount of shopping away from their home county.  A recent study completed by Greater Ohio, shows that 70 percent of counties did not capture the amount of sales tax revenue that that would be expected if the residents of the county did all their shopping in that same county.

Why does this matter?  It demonstrates that shopping patterns are regional, but our county-based sales tax structure is not.  This system rewards a minority of counties while hamstringing the majority, which creates unbalanced service provision and tax rates across the region, contributes to sprawl by incenting the development of new retail centers on greenfields, and priorities individual counties over capitalizing on regional strengths.

Take the Columbus area as an example.  The graph below shows how sales tax revenue capture changed in Franklin and Delaware counties with the introduction of Polaris.

A closer look at the broader region shows that despite the increase in spending in Delaware County between 1992 and 2009, the total change in spending for the region changed only slightly from $129 to $138 per capita, especially relative to increases in household income for the region during that time.

This arrangement creates a situation where counties with big, new malls thrive while most other places struggle.  All the while, however, the amount of retail spending within the broader region itself remains virtually the same.  In other words, this dynamic of shopping destinations moving around the region does not increase the state’s prosperity. Instead it just redistributes spending from one place to another and leaves places without major retail destinations without many options other than to raise taxes or cut services.

To modernize the taxation system to reflect the regional way we live and shop today, Greater Ohio is currently advocating for:

  • Legislation that makes regional revenue pooling permissive
  • Legislation that makes permissive mergers, consolidation, shared services, and alternative governance structures and eliminates legal and constitutional barriers to new structures of government.
  • Creation of a Governance Reform Commission to oversee and provide technical assistance to Ohio’s local governments as they adapt to the 21st century

The complete study can be found here.

 

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