In the more than half a century that Ohio has been collecting a state income tax, there have been multiple efforts to slash it or eliminate it. The idea is back in the headlines with a new bill to flatten the income tax, and GOP candidates for governor next year are making the income tax part of their pitch to voters. But But not all Republicans are on board.
Ohio’s income tax was launched on New Years Day 1972 with six brackets and the top rate at 3.5% on incomes over $40,000. By 2004, there were nine brackets and tax rates overall were 19% more than they’d been twenty years before. Then in 2009, a Republican candidate for governor came forward with a proposal: “We march over time to destroy that income tax that has sucked the vitality out of this state."
That plan came out of the launch of Republican former congressman John Kasich's campaign for governor. He based much of his winning run on eliminating a budget deficit but still cutting income taxes.
Tax cuts have been part of the last seven budgets, starting with Kasich’s first in 2011 which continued the final year of a 21% across-the-board tax cut begun under Republican former Gov. Bob Taft. Over those 14 years, nine tax brackets were slashed to two, and taxes were eliminated for people making under $25,000. Democrats have almost always opposed the tax cuts, saying they mostly benefit wealthy Ohioans and there needs to be investment in education and other state interests. But Republicans say they’re not done.
Republican candidates, lawmakers continue to push for lower income tax
“We need to bring down the income tax in this state, eventually down to zero," said Vivek Ramaswamy, the tech billionaire who is the leading Republican candidate for governor, in his campaign launch speech in West Chester last month.
“I've been for the elimination of the income tax for a long time. We need to get to zero," said Attorney General Dave Yost, who announced his campaign for governor in January.
Republicans have said that would allow people to keep what they earn, and would in turn spark economic growth. Sen. George Lang (R-West Chester), who last year proposed a bill eliminating the income tax, has a bill this session that would create a flat tax of 2.75% over the next two years.
“We should absolutely expect that by enacting the flat tax, we will encourage economic growth, thereby increasing revenues," Lang told the Senate Ways and Means Committee in January.
When asked whether he supports the flat tax proposal, House Speaker Matt Huffman (R-Lima) said that eliminating the income tax would be dramatic, but going to a flat tax wouldn’t be, and added: “I’m fully aware of the argument, which is fair, is the lower tax rate you have, ultimately the more revenue you have.”
That idea – encapsulated in the curve credited to economist Arthur Laffer – has supporters and opponents showing that it works but also that it doesn’t. So it’s uncertain. But there is also evidence that state income tax cuts create a shift to more local taxes, and toward taxes such as sales taxes that hit lower-income people harder.
Skeptics worry lower income taxes aren't needed, could cause trouble
The state income tax will generate almost $10 billion in this fiscal year. That’s 10% of the overall budget for one year and a third of state spending for a year. Many income tax opponents point to spending cuts to make that up. But Sen. Bill Blessing (R-Colerain Twp.), who chairs the committee that is considering the flat tax proposal, notes states with no income tax often have other taxes – for instance, Texas, Alaska and North Dakota have higher taxes on extracting oil and gas - known as severance taxes - than Ohio’s.
“I think we're definitely going to have to look outside of the box for revenue," Blessing said following Lang's testimony on his bill. "And I know there's this thought in the General Assembly where, 'oh my God, if we don't really get rid of a a tax expenditure, that would be a tax increase.' That nonsense needs to stop, given the price tag of things like this.”
And among the Republicans skeptical about tax cuts – the current governor and Kasich’s successor, Mike DeWine, who proclaimed in his State of the State speech this month: “Our income tax rates are the lowest today that they have been in over 50 years.”
DeWine talked about his final two-year budget in that address – a budget that doesn’t include an income tax cut. None of his four budgets have, though he’s signed spending plans with income tax cuts after his fellow Republicans added them in. When DeWine unveiled his budget, he said there’s a reason he hasn't proposed them.
“I've been involved in talking to many, many companies about coming to Ohio. There is not one company that said to us, ‘we can’t come to Ohio because your taxes are too high,'" DeWine said when unveiling his budget. "We’ve been able to cut taxes now, working with the legislature, over a number of years. We are now extremely competitive.”
DeWine has proposed raising taxes on cigarettes, gambling operators and marijuana for a child tax credit, a sports facilities fund and other items. But Republicans leaders have said they don’t support those, and have suggested the flat tax idea, coupled with spending cuts, could be added to the budget.
