Shearing Taxpayers is Bad Public Policy

In 1972, Governor John Gilligan, a Democrat, famously remarked to a reporter at the Ohio State Fair, “I don’t shear sheep, I shear taxpayers.” Gilligan is responsible for the installation of the state income tax. It was a deeply unpopular move which some cite as the reason for Gilligan’s defeat at the hands of James Rhodes in 1974.

Making Ohio’s tax structure more taxpayer-friendly is a popular policy trend for Ohio leaders to follow and venomous when they don’t.

In 1972, Governor John Gilligan, a Democrat, famously remarked to a reporter at the Ohio State Fair, “I don’t shear sheep, I shear taxpayers.” Gilligan is responsible for the installation of the state income tax. It was a deeply unpopular move which some cite as the reason for Gilligan’s defeat at the hands of James Rhodes in 1974.

Under Gilligan’s tax structure Ohioans were only allowed to keep $650 of their money through a single personal exemption. Some experts, such as the University of Virginia’s Larry Sabato, believe that Gilligan might have been a contender for a presidential run, had he not been the first governor to collect income taxes on Ohioans.

Today, the state’s income tax collections have increased by 158.3 percent, before adjusting for inflation. Meanwhile, Ohio’s gross state product (the value of all goods and labor produced in the state) grew by about 78 percent since 1990. In other words, since 1990, government has extracted tax money from the economy nearly twice as fast as the economy itself grew -siphoning off money faster than it could be replaced by economic growth.

In addition to over two decades of bad tax policies, the state’s General Revenue Fund ballooned. It was like someone forgot to turn off the faucet. Spending on new government programs increased as revenue increased, without thought of putting money away for “dry periods” of economic turmoil.

In 1990, the state’s General Revenue Fund expenditures stood at just under $11.6 billion. Less than 20 years later, state spending in 2009 had blown up to gargantuan proportions—a 131 percent in spending, practically in lockstep with the 125.6 percent increase in revenue between those same years.

However, this dead-end course of spending money as it comes in— or spending money faster than it comes in, as some past administrations have seen fit to do — is not unavoidable. Our current leadership in the General Assembly and in the Office of the Governor have plotted a course away from financial ruin, and towards prosperity.

By increasing the amount of money which hard-working Ohioans are allowed to keep before taxation and instituting other pro-growth tax policies, some financial models project that disposable personal income may increase by 440 percent over the next 10 years

Additionally, under Governor Kasich’s wise leadership, the state’s economy has slowly—but steadily—turned itself around from the precipitous of an eight percent decline in overall economic output occurring in 2007.

The same models projecting fatter wallets also project that Kasich’s plan to slash personal income tax rates by 8.5 percent—across all brackets—may also end up creating tens of thousands of new jobs and billions of dollars in additional after-tax personal income.

These predictions of a more prosperous Ohio come with a price, though — the price of stalwartness. Our leaders and representatives — and the leaders of the future — must stand fast against the urge to undo pro-taxpayer reforms at the behest of special interest groups.

Yes, the state of Ohio has come a long way from the days of Gilligan’s taxpayer shearing, but the fight for a truly pro-growth taxation policy in Ohio is not yet over. Only though perseverance by our elected leaders can policies be realized by all of us.

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