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NEW DELHI: Plans have been put forward in Ohio that aim to abolish the state income tax by the end of the decade. Republican legislators in both the House and Senate introduced companion bills at January’s close, proposing the elimination of not only state income tax for residents by 2030 but also the commercial activities tax, affecting statewide business operations.
State income tax currently applies to earnings of Ohio workers, distinct from federal income taxes. Ohio could join the nine states without a personal income tax, including Alaska and Texas, which have different policies on taxing dividends and sales of assets.
Presently, Ohio residents earning between $26,000 and $100,000 are taxed at a rate of 2.75%, while those earning above this threshold face a 3.5% tax rate. The proposed legislation outlines a gradual reduction of these rates, aiming for complete elimination by 2030.
State Senator George Lang emphasized that these measures are intended to position Ohio as “the most business-friendly state in the nation.” He, alongside State Representatives Brian Lampton and Adam Mathews, and Senator Steve Huffman, advocate for the state to emulate business and family-friendly environments like those in Florida and Texas.
Mathews highlighted the family-centric nature of the proposal, asserting, “The goal is to show that we’re business and family friendly. We know that families are the ones to best handle their dollars.”
However, the removal of income tax could lead to a financial shortfall. University of Cincinnati Economics Professor David Brasington warned that states without an income tax typically compensate through higher property and sales taxes. Mathews acknowledged the need to find an additional $8 billion to counter the fiscal gap, suggesting the exploitation of natural resources like natural gas as a solution.
Critics point out that states without personal income taxes often shift the burden to higher sales, gasoline, or property taxes. Nevertheless, Lang argues that Ohio’s recent tax cuts have already started to attract businesses back to the state, a claim yet to be verified.
State income tax currently applies to earnings of Ohio workers, distinct from federal income taxes. Ohio could join the nine states without a personal income tax, including Alaska and Texas, which have different policies on taxing dividends and sales of assets.
Presently, Ohio residents earning between $26,000 and $100,000 are taxed at a rate of 2.75%, while those earning above this threshold face a 3.5% tax rate. The proposed legislation outlines a gradual reduction of these rates, aiming for complete elimination by 2030.
State Senator George Lang emphasized that these measures are intended to position Ohio as “the most business-friendly state in the nation.” He, alongside State Representatives Brian Lampton and Adam Mathews, and Senator Steve Huffman, advocate for the state to emulate business and family-friendly environments like those in Florida and Texas.
Mathews highlighted the family-centric nature of the proposal, asserting, “The goal is to show that we’re business and family friendly. We know that families are the ones to best handle their dollars.”
However, the removal of income tax could lead to a financial shortfall. University of Cincinnati Economics Professor David Brasington warned that states without an income tax typically compensate through higher property and sales taxes. Mathews acknowledged the need to find an additional $8 billion to counter the fiscal gap, suggesting the exploitation of natural resources like natural gas as a solution.
Critics point out that states without personal income taxes often shift the burden to higher sales, gasoline, or property taxes. Nevertheless, Lang argues that Ohio’s recent tax cuts have already started to attract businesses back to the state, a claim yet to be verified.
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