Could a 0.05 percent sales tax hike put an end to extreme poverty in Franklin County?
Last week, Franklin County held the fourth of five meetings in its strategic planning initiative to address poverty in the county.
Up to this point, the planning process has been focused on gathering opinions of local leaders on four issues organizers of the meeting have suggested impact poverty: health, employment, housing and youth.
Following these meetings over the past few months, though, has got me thinking. What would it look like if the county tried to address poverty with a laser focus, working to find the most effective ways to reduce the number of people under certain income thresholds?
Let's start at the very bottom of the income scale: extreme poverty. Believe it or not, there are still Ohioans who live on less than $2 a day, the global threshold for extreme poverty.
In 2016, the Center for Community Solutions in Cleveland, using American Community Survey data, estimated that about 190,000 Ohioans lived on less than $2 a day.
Assuming the rate of extreme poverty in Franklin County mirrors the ratio of deep poverty statewide, we can estimate that about 24,000 Franklin County residents are living on less than $2 a day, or 1.9 percent of the county population.
So how do we end extreme poverty? The simplest answer is to give people money.
Conversations about “basic income” have been raging in the policy community for a few years now. This is not a new idea: The U.S. House of Representatives passed a Nixon-backed basic income proposal as early as 1970. Currently, basic income pilots are being held in Oakland and Stockton, California, and city leaders have started a study committee for a pilot in Chicago.
What would a basic income program look like in Franklin County? Funding a program to push 24,000 Franklin County residents above the extreme poverty threshold would cost about $17 million at a 100 percent uptake rate. Assuming the uptake rate is 60 percent (on the high end for social services), the total cost of the program comes to about $10 million.
Franklin County's main form of revenue is sales taxes. In 2016, Franklin County's 1.25 percent sales tax rate raked in about $300 million. This means the sales tax would have to be raised by about 0.05 percent to comfortably fund such a program.
This means if you spent $100 shopping at Easton, you would be charged about 5 cents to fund a program that would end extreme poverty in Franklin County.
There are reasons to worry about this approach. Sales taxes are regressive, meaning they impact the budgets of low-income people more than high-income people. This means that people in poverty who are not in extreme poverty would bear a disproportionate portion of this tax, making it less equitable than an income tax, which the county cannot legally levy.
But it is exciting to see that a small sales tax increase would effectively end extreme poverty in Ohio's largest county.
Rob Moore is the Principal for Scioto Analysis, a Columbus-based policy analysis firm.