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Tax Credits to Retain Talent
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Success in an innovation-based economy depends more on brains than brawn -- therefore we need to a good job of preparing, attracting and retaining world-class talent in Northeast Ohio. Two state legislators -- Jay Goyal and Josh Mandel are sponsoring a bill that would offer state income tax credits to any graduate who commits to staying in Ohio for at least five years. Linda Martz of the Mansfield News-Journal reports that this legislation also applies to out-of-state graduates to attract young talent. It’s estimated that each additional retained or attracted graduate generates an estimated additional $500,000 in state and local tax revenues over 25 years. Ohio stands to gain about a 2,000 percent return on investment, according to Goyal.The tax credits would be claimed over a 10-year period awarding up to $5,000 for an associate’s degree; $20,000 for a bachelor’s and $30,000 for a master’s level of work or higher. Bookmark/Search this post with: Trackback URL for this post:http://www.advancenortheastohio.org/trackback/470
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A very cool idea, although I'm curious about implementation. Would it apply only to gradutes from Ohio schools? Limited to public university grads? Aspirationally, I hope it would be open to any recent graduate whether from Ohio or not, including international graduates, who are excited to work, play and live in Ohio.
And one trick would be to time the tax incentives. International or non-Ohio-residents who take a risk and move here seeking work might need an initial injection of $$ to help them make it to year 2 on their own. However, too many fresh grads go home after Pomp & Circumstance trails off, especially if they don't have a job lined up yet. So if you're living with the 'rents in Ohio and searching for jobs elsewhere, you shouldn't get a break. But, if you make it to 3 years post-grad and you're contributing to the Ohio tax base, then your commitment to a state in a state of revitalization should be rewarded!
This is a bold proposal and I applaud the courage and foresight of its creators.
I believe this idea can be enhanced so that it addresses not only the problem of retaining talent, but of CREATING talent in the first place.
Ohio's economy has fundamental weaknesses that have impeded its growth for decades, and the dearth of marketable skills of its citizens is foremost among these weaknesses. Currently, Ohio's state universities are among the most expensive in the nation, and Ohio's residents have a much lower than average rate of attaining a college degree. Ohio and the individuals who live in Ohio will not see a better economy until we have an educated, skilled workforce. Economic gains are impossible without that condition.
Why not, rather than just giving tax credits to college graduates, integrate the tax credit system with a new college loan program? For example, anyone wishing to attend a university, community college, technical, or trade school in the state of Ohio could do so by paying for their education with a loan from the state of Ohio. Then, upon completion of their education, something like 50% of the Ohio state income taxes they pay will go towards repaying their loan.
It's a win-win for the state and the individual. Now, young (and older) people in Ohio, or who wish to live in Ohio, can get marketable skills for FREE. All they have to do is pay their income taxes and live in Ohio for a substantial number of years after they graduate.
Meanwhile, the state benefits because it develops a highly-skilled workforce giving rise to a robust, vibrant tax-base. For some tax-payers, Ohio will receive less tax-revenue for awhile--but just like the current plan, these individuals will stay in Ohio long enough to put down roots, start a family, and contribute to the state for many, many years after their loans have been repaid.
Now consider the workers who otherwise could not afford higher education. Ohio will probably collect more income taxes from them EVEN when 50% of their taxes are going towards repaying their loan. A job that requires a degree pays MUCH more than the low wage job that might otherwise be performing, and tax-revenues are essentially proportional to pay. And then, after their loan is repaid, these individuals will contribute to the state in ways unimaginable under the current state of affairs.
Finally, all Ohioans, even those who are not directly impacted by this program, will benefit due to the general increase in economic conditions in the state. For example, it's much easier to earn a living as a server at a restaurant when your neighbors can afford to go out to eat.
I hope that Ohioans continue to discuss these ideas. Our state needs ideas that 1) address Ohio's FUNDAMENTAL problems and 2) are revolutionary. If we have the diligence to come up with a good plan and the courage to implement it, Ohio and the individuals who live within its boundaries can see some real progress.
You have made several insightful comments. While in the General Assembly I was working on this same tax credit. It started out as an idea for a loan forgiveness program but that was soon expanded to include all graduates with or w/o loans to attract and retain both. We also explored a loan program feature but soon discovered that the federal programs ex: strafford loans and others, covered both income disadvantanged students and others that wanted to apply. Creating a new loan program has several major economic disadvantages and the additional loss of loans for those who don't complete their education. The tax credit also has the feature of being able to carry forward amounts of the credit from previous years not fully used and to fit most types of loan payment programs. This allows the graduate to modify the credit to apply fully to the years when they are earning income such as if they needed a longer period to find their first job after graduation. Also the tax credits most attractive feature is the ability to attract graduates who have abtained their degree from out side Ohio who relocates to Ohio. The tax credit also applies to associate degrees to help retool residents looking to up grade their skills. Several deans at Ohio colleges were thrilled at the prospect of a $20,000 credit to offset tuition here in Ohio to attract competitive students from out of state. With a tax credit any business that relocates to Ohio would by its presence in Ohio have it graduate employees benefiting from the tax saving. I say lets continue the discussion to help rebuild Ohio.
Thanks for your comments, Earl. I really appreciate the first-hand account of the history of this proposal and the explanation of its features. Your point about not missing out on the federal loan opportunities is especially important.
If I could ask a few more questions from an insider. . .
1) Assuming this goes into effect, will there be any special effort made to persuade people who want more education, but are concerned about that cost, that this will help them afford it? By that, I mean, will this be marketed primarily as a way to keep graduates in the state, or as a way to convince people they should pursue more education because the state is now making it affordable?
2) Will the tax credit apply in any way to people who have started a degree program, but stopped partway through for whatever reason?
I ask because, to some people, it might be hard to connect the tax credit to their college costs mentally. For example, the tax credit will come months/years after they're schooling, and psychologically, it can be difficult to connect events separated by that much time. I would hope many people would see this as greatly reducing the cost of their education and as a result, getting them in the classroom. However, I think it might take some clever marketing to really make them see that.
Also, some might be, say, 80% sure they'll complete a degree program. If the tax credit only applies if they finish their degree, they might still be reluctant to even try.
Imagine, for example, a single mother wanting to complete an associate's degree. She knows it will help her family financially, but also knows her life is unpredictable, and it might be hard to finish the program, especially in a short time period. If she sees little or no financial risk, she will probably give it a try, and hopefully succeed, although she might be going to school off and on over the course of years. If she doesn't see the tax credit as protecting her from this financial risk, she could very well not even try. If she knows she'll get some percentage of her money back through a tax credit, she might take a chance.
Of course, it's much better for Ohio to only give tax credits to people who have upgraded their job skills in a significant way, so there is a good argument to not give any money to people who haven't finished the degree program. My concern is that many people who could very well finish won't try because the cost is too great for the risk. Perhaps it would be optimal for the state and the individual to share the risk somehow? For example, perhaps a 50% credit for out-of-pocket education costs the year that they are incurred?
At first blush, this seems to be a great idea. I agree with the one respondent that the state should consider coupling it with a college loan repayment program for graduates of Ohio colleges and universities.
Get a grip people. Try improving the place you want people to stay. Acts of desperation are to be pitied not encouraged. You won't respect yourself in the morning. Clean up the local government, make your downtown safe, provide excellent city services & cool entertainment venues. This isn't rocket science. You just need people to get a clue.