Some advocates for low-income Ohioans oppose a plan to eliminate state income tax, which has fallen sharply since 2004.
Critics of eliminating personal income tax warn against the change, saying it will impact other services and possibly result in a different tax increase.
Policy Matters researcher Zach Schiller said cutting income taxes would cut money for schools, libraries, parks and other public resources. He adds that it could also lead to a switch to higher sales taxes.
“You know, the idea that it would be for all Ohioans is just plain wrong. Ohioans with the lowest incomes wouldn’t get any reductions. And meanwhile, they would see reductions in services and, most likely, increases in sales taxes or other taxes that fall more heavily on low- and middle-income people. And that’s what we’ve seen before,” Schiller said.
Sen. Steve Huffman (R-Tipp City) has proposed a bill for eliminate state personal income tax together for 10 years. The legislation came at a time when Ohio income tax rates have already been on a downward trend since 2005.
Schiller said Ohio’s poorest residents pay almost twice as much of their income in state and local taxes than people in the top 1one percent. Ohio lost about $7 billion a year in tax revenue because of income tax cuts since 2005.
Huffman noted that because income taxes have been reduced over the years, incomes have stayed about the same. Huffman said that could continue with the phasing out of income tax. Republicans in the Ohio Legislature have long argued that lowering income taxes makes the state more attractive for economic development.
But Schiller noted that Ohio is losing a congressional seat this year because the state’s population is shrinking relative to the rest of the country. Thus, for Schiller, the idea that income tax cuts have led to economic prosperity is simply wrong.
Schiller said some states that have eliminated income taxes have reversed those actions. He used Kansas as an example, saying the deep state income tax cuts a few years ago caused backlash because they cut public education and other public services. Kansas eventually reversed those tax cuts.
Cutting income taxes is a failed experiment that hasn’t spurred economic development, Schiller said. He added that it was not necessary since Ohio’s income tax would already be lower than the national average.
Copyright 2022 The Statehouse News Bureau. To see more, visit The Statehouse News Bureau.