Some advocates for lower-income Ohioans are pushing back against a plan to eliminate the state income tax, which has fallen sharply since 2004.
Critics of eliminating the state personal income tax are cautioning against the change, saying it would have consequences on other services and possibly result in a different tax increase.
Policy Matters researcher Zach Schiller said getting rid of income taxes would reduce money for schools, libraries, parks and other public resources. He adds that it could also result in a shift to higher sales taxes.
“You know the idea that this would be for all Ohioans is simply wrong. The lowest income Ohioans would get no reduction. And meanwhile they would see reductions in services and most likely, increases in the sales taxes or other taxes that fall more heavily on lower- or middle-income people. And this is what we’ve seen already,” Schiller said.
Sen. Steve Huffman (R-Tipp City) has proposed a bill to eliminate state personal income taxes altogether, over the course of 10 years. The legislation has come at a time when Ohio’s income tax rates have already been trending downward since 2005.
Schiller said the poorest Ohioans pay almost twice as much of their income in state and local taxes as people in the top 1one percent. Ohio has lost about $7 billion a year in income tax revenue through income tax cuts since 2005.
Huffman has noted that, as income taxes have been reduced over the years, revenue has stayed about the same. Huffman said this could go on as the income tax is phased out. Republicans in the Ohio Legislature have long-contended that lowering income taxes makes the state more attractive for economic development.
But Schiller noted Ohio is losing a congressional seat this year because the state's population is declining relative to the rest of the country. So, to Schiller, the idea that income tax cuts have led to economic prosperity is simply faulty.
Schiller said some states that have eliminated income taxes have reversed those actions. He used Kansas as an example, saying that state's deep cuts to the income tax a few years ago resulted in backlash because it reduced public education and other public services. Kansas eventually rolled back those tax cuts.
Cutting income taxes is a failed experiment that has not boosted economic development, Schiller said. He added that it's not necessary since Ohio's income tax would rate is already below the national average.
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