Activist state

Ohio could completely eliminate state income tax within the next 10 years

COLUMBUS, Ohio — A proposed GOP bill would eliminate state income tax in Ohio within the next 10 years.

Senator Stephen Huffman, a Republican from Tipp City, sponsored Senate Bill 327 – which would reduce state income tax by 10% each year until it disappears.

It comes after Ohio continues to drop its population. State leaders are looking at ways to retain and recruit people, offer student loan forgiveness, put up billboards to recruit new talent and now the new bill hopes to increase competitiveness .

“It’s about getting money back into the hands of people and the economy going forward as well,” Huffman said in an interview with News 5.

The Republican takes it back about 10 years, referencing former Gov. John Kasich as a starting point.

About 10 years ago, the Legislative Assembly reduced income tax from 6% to about 4%. There used to be nine levels of tax brackets, but now there are only five left.

“It’s just the game plan for the General Assembly to say, ‘This is what we plan to do in the future so that we can become more competitive for jobs and businesses in the future’ “, did he declare.

So this bill will keep more money in your pocket, but progressive activists say it comes at a high cost.

“We are very concerned that we are going to cut billions of dollars of revenue that could be invested in our schools, that our schools need, invested in mental health programs, public health,” Nick Bates, director of fiscal and fiscal policies for One Ohio Now, said.

Income tax receipts represent 28 to 30% of tax receipts. The nearly one-third cut in revenue could cut funding for social services, Bates said.

Huffman disagreed. In 2010, the state collected about $8.2 billion in personal income tax and that’s when the state level was at 6%, he said. Then the level was lowered to 4%, with the state still collecting $8.2 billion, he added.

Morgan Trau, Ohio Department of Taxation data

Ohio Personal Income Tax: Total Collections

“So we haven’t declined at all over the last ten years,” Huffman said. “So I believe that through economic development, by creating more jobs in Ohio, we won’t have a real deficit to fill.”

Bates doesn’t believe this strategy will work.

“But when you look at the last eight years of spending, Ohio has seen investment go down, especially when you adjust for inflation, investment and poverty alleviation initiatives, investment in higher education “, did he declare. “All of these jobs coming up in Central Ohio with Intel – these will be jobs that will require trained people, whether it’s a four-year degree or a two-year degree.”

Since 2005, the state has reduced income taxes, and Bates doesn’t think there have been any benefits.

“Ohio continues to track the nation as a whole and many different economic indicators like wages, economic growth, and prosperity – particularly making sure that prosperity and economic growth has been felt by all Ohioans, those who live in the suburbs, those who live out in rural communities and those who live in our cities,” Bates said.

Huffman brings it back to business. If a company decides to go to Ohio or Wisconsin, they’ll choose the former because, essentially, employees get a 5% raise without the company doing anything, he said. .

News 5 asked a nonpartisan economist to review the data. Michael Goldberg, executive director of the Veale Institute for Entrepreneurship at Case Western Reserve University, helped create a list of pros and cons.

Eliminating Ohio State Income Tax: Pros and Cons


Eliminating Ohio State Income Tax: Pros and Cons

“If you’re an Ohioan looking to pay less tax, you might be excited about this bill,” Goldberg said.

In addition to paying less tax, the bill could encourage people to stay or move to Ohio rather than another state with an income tax. This could make Ohio more attractive to businesses, knowing that their employees could relocate without those high personal taxes.

“I think the challenge for all of us, all Ohioans, is when you take out this type of revenue that is 28% of our budget, how is it replaced?” he said.

The loss of one-third of state revenue could lead to spending cuts in other areas or services or lead to higher taxes on other goods, such as increased sales tax.

“I guess it would be future general meetings to cut the budget or raise the income tax,” Huffman said. “But I believe that at this General Assembly and in the future, we can balance the budget in a way that will help all Ohioans.”

Depending on which side of the bracket someone is on, the cut might be more beneficial to them.

“The people who will benefit the most are the people who earn the most, just on an aggregate basis, they’re going to save more on their income taxes if this goes away,” he said. “It impacts everyone in Ohio, but those who would benefit the most are those with the biggest personal tax bill.”

In fiscal year 2021, the annual limit on taxable income to not pay tax was increased from $22,150 to $25,000.

“The wealthy pay more of their income in income taxes than low-income people, but when the state cuts the budget, and we saw this after the Great Recession, they cut people’s money. local governments, they cut local school money,” Bates said. “So these local mental health taxes, these local library taxes are starting to go up, property taxes have to go up, so you have seniors on fixed incomes, you have people struggling to pay no more sales tax on toilet paper.

“Local communities have to collect that revenue somewhere to provide education, public safety, community health and everything else.”

Goldberg brings up the Kansas problem.

“Kansas eliminated the personal income tax and had hoped that additional economic activity would fill that gap,” Goldberg said. “It didn’t happen, they ended up having to put it back.”

The tax was reduced in 2012 but reinstated in 2017.

“I don’t think we’ll be like Kansas,” Huffman said. “That will go into the revised code, and the revised code is what we can change. If future general meetings don’t like this game plan, it can certainly be changed.”

Follow WEWS State House Reporter Morgan Trau on Twitter and Facebook.