COLUMBUS, Ohio—Ohio’s state personal income tax would be phased out completely over the next 10 years, under new Republican-sponsored legislation introduced Tuesday in the Ohio Senate.
Senate Bill 327, sponsored by nearly a third of Ohio GOP senators, would cut Ohio’s non-business income tax by 10% of what it is now every year for the next 10 years. If passed, Ohio would become the eighth state to vote to abolish its personal income tax altogether.
Many Ohio Republicans – most notably, ex-Gov. John Kasich – have campaigned for years to phase out the state’s income tax. Since Kasich took office in 2011, Ohio’s income tax has been cut from a maximum rate of nearly 6% for the richest Ohioans to a top rate of about 4% last year, according to the Ohio Department of Taxation.
The state’s income-tax rate is lower for residents who make less money: Ohioans who received $25,000 or less in 2021 didn’t have to pay any state income tax at all.
Gov. Mike DeWine last year signed a state budget bill that cut state income taxes by 3% across the board — though it also removed the state’s top income-tax bracket, effectively giving Ohio’s richest people a tax cut of almost 17%.
State Sen. Stephen Huffman, a Tipp City Republican who introduced SB327, told cleveland.com that his legislation would simply finish what lawmakers started during the Kasich administration.
“We need to be more competitive like the states of Florida, Tennessee, and other states” with no state income tax, Huffman said.
Huffman said that lowering the income tax will create more economic activity and, paradoxically, more tax revenue — noting that even though lawmakers have lowered income-tax rates, total income tax receipts are higher than where they were a decade ago.
In fiscal year 2021, the state’s general revenue fund received $10.2 billion in income taxes; a decade ago, in fiscal year 2011, $8.12 billion worth of income taxes entered the state’s general revenue fund, according to the Ohio Department of Taxation.
Of course, eliminating the state income tax entirely would reduce revenue to zero, Huffman said. But he predicted that lawmakers 10 years from now will be able to fill that hole with a combination of higher revenues from other tax sources (such as sales taxes) and cutting state government spending (exactly where those cuts would come from would be up to future general assemblies, he said).
“If we become competitive and continue to bring businesses like Intel here, we probably won’t have to make any cuts,” Huffman added, referring to Intel’s recent decision to build a $20 billion semiconductor manufacturing complex outside of Columbus.
Huffman said he hasn’t discussed the legislation with his cousin, Ohio Senate President Matt Huffman, a Lima Republican whose support is crucial for any bill to pass the chamber.
Legislative Democrats are likely to oppose Huffman’s bill, as they have argued that cutting income taxes helps the rich much more than it helps the poor.
“Why do we want to further accentuate income differences, reward the wealthiest Ohioans who surely don’t need it, and reduce the ability of the state to pay for all manner of services?” asked Zach Schiller, research director for Policy Matters Ohio, a left-leaning think tank.
“It means that the state would have trouble paying for everything from parks to prisons,” Schiller added. “So, to me, it’s both the height of fiscal irresponsibility as well as an attack on fairness in the Ohio tax system.”
Schiller noted that Kansas encountered a fiscal crisis after it passed a major state income-tax cut in 2012 (including eliminating all income taxes on small businesses, something SB327 would not do). Predictions of an explosion of economic growth didn’t come true, budget deficits widened, and state spending was slashed, leading Kansas lawmakers to repeal the cuts in 2017.
“The idea that this somehow will be a great tonic for the economy — well, that’s been thoroughly disproven,” Schiller said. “We’ve already cut our (state) income tax by almost half — has it resulted in an Ohio that is growing faster than the rest of the country? Obviously not.”
Asked about the argument that abolishing the state income tax would help the rich more than the poor, Huffman replied: “It’s going to cut out taxes for a large amount of working-class people also. So we’re working on both the working class and all taxpayers in the state.”