In the viral Great Recession-era “Hurried Cleveland Tour Videos,” comedian Mike Polk provided an overview of his faded hometown. The scenes were of “crippling depression,” the opportunity to “buy a house for the price of a VCR.”
Ohio, like Michigan, adopted a state income tax some fifty years ago, in 1971. In doing so, it sealed its fate as a founding member of the Rust Belt. As I have been writing lately, the states that in the 1960s and 1970s added an income tax, including all of New Jersey to Illinois, ended up being exactly coextensive with the Rust Belt that emerged and settled definitively in the 1980s.
Cleveland’s claim as the forge of the American industrial revolution is as strong as anyone’s. Rockefeller’s decision to settle in that city during the civil war sealed his fate. The founding of Standard Oil in Cleveland in 1870 transformed the American economy forever. Here was a business that would redefine quality control, customer service and management practice, not to mention the accumulation and application of profits, creating a new level of ambition for what companies could aspire to as public-service ventures. The immense decade of economic growth of the 1880s saw phenomenal expression in Cleveland, which, among other innovations, pioneered suburban living.
Cleveland veterans recall that, starting in the 1940s, the swinging arc of Buffalo through Cleveland, including Pittsburgh, Detroit, and Chicago as well, accounted for a disproportionate share of world economic output. The geographic center was Cleveland.
In the early 1930s, Ohio had no sales or income tax. After local property taxes hit homeowners in the early years of the Great Depression, Ohio adopted a sales tax in 1933. University of Miami tax professor George W. Thatcher contemplated his Ohio from 1952 onwards with these words:
“A study of Ohio State Expenditure shows a rapid increase since 1931. Total State Expenditure … reached a rate of increase for the State of Ohio from 1931 to 1950 [of] 669 percent, while for the nation as a whole the rate of increase was just 426 percent. Per capita spending for the state of Ohio increased 642% from 1931 to 1950, while for the United States the increase was only 440%… The state, since 1932, has assumed greater responsibility for the welfare… for the state in public education and on the highways”.
1880s, massive private wealth creation, including mass public services and amenities; mid-20th century, creeping state takeovers of all sorts of functions, including—sensitive Rockefeller—transport.
In 1952, when the worthy Thatcher reported this data, Ohio had barely contemplated the fiscal implications of the baby boom. Voters would let the authorities know how they felt. In a remarkable essay in a recent issue of Journal of Political HistoryJosh Mound chronicled the collapse of public support for title issues in Ohio—particularly in the steamy city of Youngstown—in the 1950s and 1960s. We appeal to Mound’s work in our new book on the history of the income tax, Taxes have consequences.
Place after place in Ohio in the post-World War II era tried to raise their property tax rates. O quotes. The massive post-1945 economic growth raised the property value immensely. Taxed at the same rate, there would have been (there was) a harvest of new revenues for governments. Ohio tried repeatedly in the 1950s and 1960s to raise the property tax quotes.
The failures became so epic – they laughed about it on national TV, in To laugh—that Ohio’s new governor, John Gilligan, imposed a state income tax in 1971. He was a one-term, ousted from office in the vicious stagflation recession of 1975. In New Jersey, Brendan Byrne, “One-Term Byrne ”, should have met the same fate after he started an income tax in 1976. Somehow he got re-elected.
The purpose of Ohio’s income tax, like that of Pennsylvania the same year, was to cover expansive expenditures on education from preschool to college. Kent State was going to get a facelift. The problem is that you need young people for these plans. Since 1971, Ohio has lost a lot in its share of the national population and national income. I offered Michigan’s horrible statistics on that score last week. Ohio’s are only slightly better – see chart at Taxes have consequences.
Ohio’s maximum income tax rate started at 3.5%. In ten years, it was 9.5%. In the last twelve years, the maximum rate has dropped by a third, from 6 to 4%. Ohio has miles to go before it thrives.
Columbus was supposed to be Ohio’s up-and-coming city, the technology hub and incubator of the future. How they got Intel