Saturday, March 15, 2003

Tax change plan uses old data



Gov. Bob Taft's estimate that ending income tax reciprocity will gain $35.8 million in tax revenues over two years - and help plug the state's $4 billion deficit - is outdated and probably inaccurate.

Despite more recent tax data being available, state officials have not calculated a more up-to-date projection.

The Ohio Department of Taxation arrived at the $17.9 million-a-year projection using commuting data from the 1990 census and income tax patterns from 1991.

The department's math:

• According to the 1990 census, almost 122,000 residents of Kentucky, Indiana, Michigan, Pennsylvania and West Virginia commuted into Ohio for work every day. But after 90,000 Ohio residents left to work in those states, Ohio still gained a net 32,000 workers in Ohio.

• For tax year 1991, about 18,800 residents of those states filed nonresident tax returns to Ohio to reclaim income tax erroneously withheld for Ohio. From those returns, state tax officials figured that those nonresidents would owe $11.8 million in Ohio taxes without reciprocity.

• Extrapolating that group of 18,800 residents to the group of 32,000 total commuters, tax gurus came up with $20 million. After subtracting the 10.5 percent that goes to local government assistance funds, $17.9 million would be left for Ohio's general fund.

But this calculation is already outdated since the U.S. Census released its latest study on commuting patterns just last week. According to the 2000 Census, Ohio gains only 26,700 out-of-state commuters every day.

Officials from the Department of Taxation have not updated their estimate from the 1991 tax year on how much commuters would owe in Ohio taxes.

But using their original estimate, those 26,700 commuters should bring in only $15 million a year to state coffers without reciprocity. Greater Cincinnati's Northern Kentucky commuters alone will add $14.5 million to the pot.

Overall, however, that would cover less than 0.4 percent of Ohio's projected budget shortfall.

Amy Higgins




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