In the viral “Hastily Made Cleveland Tourism Videos” of the Great Recession era, comedian Mike Polk provided a panorama of his faded hometown. The scenes revolved around “crippling depression,” the opportunity to “buy a house for the price of a VCR,” urban redevelopments that looked like “a Scooby-Doo ghost town,” and the perches downtown where “poor people everyone was waiting for buses.” Hey, but “at least we’re not Detroit!”
Youngstown before income tax (Photo by Keystone-France/Gamma-Keystone via Getty Images)
Gamma Keystone via Getty Images
Ohio, like Michigan, introduced a state income tax about fifty years ago, in 1971. In doing so, it sealed its fate as a founding member of the Rust Belt. As I’ve written of late, the states that introduced income taxes in the 1960’s and 1970’s, including everyone from New Jersey to Illinois, turned out to be exactly as extensive as the rust belt that emerged and took root forever in the 1980’s .
Cleveland’s claim as the forge of the American Industrial Revolution is as strong as any. Rockefeller’s decision to settle in this city during the Civil War sealed his fate. The founding of Standard Oil in Cleveland in 1870 changed the American economy extensively and permanently. Here was a business that would redefine quality control, customer service, and the practice of management, not to mention the accumulation and appropriation of profits, and create a new level of ambition for what corporations could aspire to be as publicly useful corporations. The decade of immense economic growth of the 1880s found phenomenal expression in Cleveland, which among other innovations pioneered suburban living.
Cleveland vintage cars recall that the arc that swings from Buffalo through Cleveland, including Pittsburgh, Detroit and also Chicago, has accounted for a far disproportionate share of world economic output since the 1940s. The geographic center was Cleveland.
As of the early 1930s, Ohio had neither a sales tax nor an income tax. After local property taxes weighed on landowners in the early years of the Great Depression, Ohio introduced a sales tax in 1933. Miami University tax professor George W. Thatcher viewed his Ohio as of 1952 with these words:
“A study of Ohio state spending shows a rapid increase since 1931. Total state spending . . . for the state of Ohio from 1931 to 1950 was at a rate of increase [of] 669 percent, while nationwide the rate of increase was only 426 percent. Ohio state spending per capita increased 642 percent from 1931 to 1950, while the increase in the United States was only 440 percent… The state has assumed greater responsibility for welfare since 1932… Here, too, there has been an increased financial one State participation in public education and on highways.”
1880s, vast private wealth accumulation including mass public services and institutions; Mid-20th century creeping government takeovers of all sorts of functions including – touché Rockefeller – transportation.
In 1952, when the worthy Thatcher published this data, Ohio had barely considered the fiscal implications of the baby boom. Voters let officials know how they felt. In a notable essay in a recent issue of the Journal of Policy History, Josh Mound chronicled the collapse of public support for school bonds in Ohio—particularly in the chimney town of Youngstown—in the 1950s and 1960s. We reference Mound’s work in our new book on income tax history, Taxes Have Consequences.
Place after place in Ohio tried to raise property tax rates in the post-WWII era. The rates. The enormous economic growth after 1945 increased the value of property immensely. Taxed at the same rate, there would have been a harvest of new revenue for governments. Ohio made repeated attempts to raise property tax rates throughout the 1950s and 1960s.
The failures became so epic — they laughed about it on national television, on Laugh-In — that Ohio’s new governor, John Gilligan, pushed through a state income tax in 1971 from 1975. In New Jersey, “One-Term Byrne” Brendan Byrne was supposed to do the same Fate befell him after he introduced an income tax in 1976. Somehow he got re-elected.
The purpose of the Ohio income tax, as in Pennsylvania in the same year, was to cover the heavy expenditure on education from preschool through college. Kent State should get a facelift. The problem is that you need young people for such plans. Since 1971, Ohio has declined sharply in population and national income. I offered Michigan’s horrendous stats on this point last week. Ohio is just a little better – see the table in Taxes Have Consequences.
The top income tax rate in Ohio started at 3.5 percent. Within ten years it was 9.5 percent. In the last twelve years, the top rate has fallen by a third from 6 to 4 percent. Ohio still has miles to go before it thrives.
Columbus aims to be Ohio’s up-and-coming city, the tech hub and incubator of the future. How did you get IntelINTC to get involved there recently? Tax breaks (plus visions of a federal subsidy). Have a onerous tax rate, and exemption from it becomes valuable. Intel’s stock hasn’t moved this millennium. This is the kind of outfit that’s ready to do business in Ohio. In Rockefeller’s day, the place attracted visionaries before they got started.
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