Tuesday, July 21, 2009

Would $17/week keep you in Ohio?

That's the question and it appears that state legislators believe the answer to the question is 'yes.'

According to today's paper,

"The program, watered down from a bill offered by Sen. Stephen Buehrer (R., Delta) and approved by the state Senate, offers cash grants to home buyers that would be second mortgages and would disappear after five years if the graduate stays in the state, automatically adding to the equity in the home. "There would be a cap on income, so we would not be giving a free lunch to people with half-a-million-dollar jobs,'' Mr. Buehrer said. His original plan had no income limits and would have offered larger grants to those earning a higher degree."

So we're going to take tax money from everyone who's already struggling to stay in our homes (remember all the political fretting over Ohio's highest foreclosure rates????) and just give it to recent college grads as a gift? How does that help all Ohioans?

The simple answer: it doesn't.

Taking tax dollars from some in order to redistribute it to others is exactly what Republicans in Columbus have been criticizing the federal government and the President for: redistribution of wealth by politicians who think they know better who 'deserves' the money. Yet they go and do the exact same thing in Ohio. Do they expect that we won't notice?

And, there are limits on income in order to qualify. If you're one of the few graduates making a good living (no more than $61,800 for a one or two-member family in Lucas County) - the kind of wage earners we really want to keep in the state - you don't qualify. This would be only for those of lesser incomes. As Buehrer explains, "There would be a cap on income, so we would not be giving a free lunch to people with half-a-million-dollar jobs."

Really? Do we really have college graduates going into 'half-a-million-dollar jobs' upon graduation? In Ohio? And if this is to keep college graduates in the state, we have to know which of those graduates are most likely to leave. What do you think: the ones with potential incomes above $50,000 or those with potential incomes below that amount? So if only lower earnings are eligible, will we really get the results touted?

They must think that keeping college graduates here for five years is more important than providing a state environment that is attractive to everyone. And since it's only for five years, how likely is it that these same grads will take this option, wait the five years, and then flee? Well, that's a good question - and one that isn't answered.

So how much will this cost? Again, a good question without an answer:

"The state budget contains no appropriation for the program and there are no estimates on the revised program's cost."

The paper uses an example of 3% of the purchase price of the home for the second mortgage bribe. So let's take a look at the 'incentive.'

If you're earning $60,000/year, it's likely you'd be looking at a house in the $150,000 range (based upon the suggestion that your mortgage be no more than 2.5 times your earnings). A 3% second mortgage on a home valued at $150,000 is $4,500. When you divide that by the 5 years, that's $900 per year - or $17 per week.

Would you stay in Ohio for $17 per week? Or might a recent college graduate weigh that $17/week against other factors and components of leaving the state and getting a better paying job in a more taxpayer-friendly state?

Being a college graduate, hopefully they've got the financial and educational wherewithal to effectively evaluate, for a 5-year period of time, the value of $17/week for staying in Ohio versus leaving the state and getting lower overall tax rates, higher earnings potential, better climate and other such amenities, including getting a good-paying job in the first place (something lacking in Ohio in many areas right now).

So what value does this unfunded program really have?

None - except for the politicians who want to claim they've 'given' us something, 'helped' keep people in Ohio and 'deserve' our vote as a result.


LargeBill said...

Ridiculous. As you pointed out, people decide what job to pursue and where to live based on many factors. College graduates will not be influenced by $17 a week. Divide that even further and it is $2.43 a day. Basically 2 cups of coffee (or half a cup if you foolishly get it at Starbucks). Here is an idea. If they want Ohio graduates to stay in state or want to attract out of state grads reduce taxes to make Ohio more competitive instead of buying them a cup of coffee.

Kadim said...

I personally think there is some merit to an idea like this, but this particular execution is deeply lame.

Starting with the fact that college graduates don't fancy buying homes. Home ownership is a long-term commitment--most people under 30 barely know what color car they want to drive, and certainly aren't interested in taking on a multi-decade obligation.

Another reason why they won't be adding debt is because most college students are already swimming in the stuff. Which is where this bill should have gone--if you want to incentivize students to stay in Ohio, help them with their student loans. Don't incentivize them to add new debt they don't want.

We can argue whether or not people should be incentivized to live and work in Ohio. I believe there's merit to the idea, and between offering tax breaks/subsidies/credits etc to businesses to move to Ohio (which in my opinion is a failed system, and its aggressive use in Ohio is the reason why we are struggling so much) or offering incentives to people, I think giving people incentives is the way to go.

Low taxes are important, but they aren't a big draw for recent college graduates, many of whom seek bright lights and big cities. The fact that many of my friends desperately seek to move to places like NYC, Boston, Chicago, DC or California show that they aren't particularly turned off by high taxes. (Though they might be in middle age.)

I lived in New York City for a bit. The regulation is absurd. The tax rates are abysmal. I had times in which I literally cried about how expensive it was, and how much of a struggle it is to live there.

But there's nothing like it, and a part of me would love to return.

Maggie Thurber said...

Kadim - you make some good points, especially about what young people are looking for in a place to live.

On another note, I'm opposed to government 'incentives' in any form - to individuals and to businesses. I'm of the opinion that the best attraction a state or community can offer is an environment conducive to growth and prosperity. That doesn't come by taxing some in order to give 'incentives' to others - especially others who would be in direct competition with those taxed (as in tax breaks for businesses).

Excellent point about debt, too.

Mmatters said...

At best, this will be a tiny benefit paid to people who were going to remain in the state anyway.

The people we want to keep are college grads, and they often decide where they will live based on where they will be able to get a job. Family considerations are of course important to many, but getting work is trumping that in many cases.

One person I know has two kids who graduated in the past few years and would have wanted to work in Ohio, but found nothing here. The two grads are now in TN and AL, respectively. As Bill noted, $17 a week would have meant nothing to them.

That an alleged Republican is proposing this shows that we have two Beltway problems: DC and I-270 in Columbus. Many go into both places as conservatives, but few seem to reliably stay that way.

Kadim said...

I understand why you're against person/business incentives, but I see person incentives as the only way to solve Ohio's problems.

Our main problem is the "middle income trap." Labor in Ohio is too expensive for us to compete with cheaper places (like China, but I'm including states like Alabama) and we're not educated/advanced enough to compete with productive, innovative places.

So we're stuck in the middle with no place to go (well, except down. And that's what's been happening, since we're not become more productive/advanced, the jobs available to Ohioans are slowly but surely paying less. That's how we've gone from one of the richest states in the union to the low-end of the pack in 3-4 decades.)

I came to the conclusion that low taxes/low regulation won't be enough on its own, as that will simply pave the way towards become an ever cheaper/poorer state.

The solution, in my mind, is importing more productive (i.e. educated) people until native Ohioans catch up. The rest of Ohio will ride on their coattails. It's essentially a different variation of trickle down economics. :-)

As I like to say, imagine how Ohio would be different if we imported, say, one million Indians with advanced degrees.

Maggie Thurber said...

So, Kadim, where would the one million Indians with advance degress work?


Kadim said...

The work would come. They'll go where the talent is.

Maggie Thurber said...

Kadim - I think this is a chicken & egg situation ... which makes it very difficult to address...

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