Rating: Making progress
- Ohio is making progress because the state has adopted a plan for regular evaluation of tax incentives.
- The state recently established a legislative committee to study tax incentives, an approach that has worked well in other states.
- The committee could strengthen the process by requesting written evaluations from professional staff to inform its work.
Ohio evaluation law
Year enacted: 2016.a
Who evaluates: Tax Expenditure Review Committee.
Length of review cycle: Eight years.
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In Ohio, regular evaluation of tax incentives has won broad support from across the political spectrum, with think tanks on both the left and right and some business groups backing the concept.b With that encouragement, Ohio lawmakers approved legislation in December 2016 that requires regular evaluation of all tax expenditures, including economic development tax incentives.c
The measure created the Tax Expenditure Review Committee, made up of six legislators with the state tax commissioner as a nonvoting member.d Other states have created new legislative committees as a way to study tax incentives in more depth. This approach has proved especially successful in Oregon.e The Ohio committee will be responsible for reviewing tax expenditures on an eight-year cycle and recommending whether each tax expenditure should be continued, modified, or ended.f
The law directs legislative staff to assist the committee but does not specify that the staff should provide evaluations.g Other states, such as Florida, Indiana, Maryland, and Washington, have laid out specific responsibilities for legislative staff to study the results of incentives and have received rigorous evaluations as a result. The Ohio committee could act to ensure that its work is informed by similar high-quality evaluations.
The size of some of Ohio’s incentives is growing. Starting July 1, 2016, the state doubled the cap on its film tax credit from $40 million a biennium to $40 million a year.h The state’s Job Creation Tax Credit cost $80 million in fiscal year 2015, twice as much as forecast.i Evaluations should help Ohio determine whether these commitments are worth the price.
- Ohio Rev. Code Ann. § 5703.95, http://codes.ohio.gov/orc/5703.95v1.
- Editorial, Akron Beacon Journal, Sept. 8, 2012, http://www.ohio.com/editorial/editorials/support-from-all-sides-1.332803; The Pew Charitable Trusts, “Evidence Counts: Evaluating State Tax Incentives for Jobs and Growth” (April 2012), 8, http://www.pewtrusts.org/~/media/assets/2012/04/12/ pew_evaluating_state_tax_incentives_report.pdf.
- Ohio H.B. 9 (2016), https://www.legislature.ohio.gov/legislation/legislation-status?id=GA131-HB-9.
- The Pew Charitable Trusts, “Tax Incentive Programs: Evaluate Today, Improve Tomorrow” (January 2015), 8–9, http://www.pewtrusts.org/~/media/assets/2015/01/ statetaxincentivesbriefjanuary2015.pdf.
- Ohio Rev. Code Ann. § 5703.95.
- Janet H. Cho, “Ohio’s $40 Million Motion Picture Tax Credit Will Bring Even More Hollywood Jobs and Films to Greater Cleveland,” The Plain Dealer, updated July 1, 2016, http://www.cleveland.com/business/index.ssf/2016/06/ ohios_40_million_motion_picture_tax_credit_will_bring_even_more_hollywood _jobs_and_films_to_greater_cleveland.html.
- Chelsey Levingston, “Tax Breaks for New Jobs Grow in Value; Officials Underestimate Impact of Credits Awarded to Companies,” Dayton Daily News, Sept. 21, 2015, https://www.highbeam.com/doc/1P2-38767200.html.