Lawmakers look to eliminate Ohio’s income tax

COLUMBUS, Ohio (WCMH) — Some Republican lawmakers at the Statehouse want to eliminate the state income tax for all Ohioans by 2030, joining nine other states that currently have no state income tax.

“We’ve been working on eliminating the income tax for decades,” Rep. Adam Mathews (R-Lebanon) said. “We had a peak in 1984 of nine tax brackets with the highest at 9.5%.”

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Reps. Mathews and Brian Lampton (R-Beavercreek) and state Sens. George Lang (R-West Chester) and Stephen A. Huffman (R-Tipp City) have introduced sister bills in the House and Senate. The House is proposing a flat rate of 1.17% by 2028, while the Senate wants to get to a flat rate of 2.7% by 2026, before ultimately eliminating the income tax altogether.

“We’ve been trying to get rid of the income tax and every time we’ve cut it, we increase revenue,” Mathews said.

But across the aisle, members of the Ohio House Finance Committee, like Rep. Daniel Troy (D-Willowick), are skeptical about what this might mean for the state.

“This is not good for long-range stability of the state of Ohio,” he said.

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Rep. Bride Rose Sweeney (D-Westlake), ranking member on the Ohio House Finance Committee, said the loss in revenue would be detrimental.

“A $20 billion hole in our budget,” Sweeny said. “They’re putting us in a choice, if this is a serious proposal, of making slashes to our state government, to our school funding, to higher education, to healthcare in the state.”

But Mathews said it won’t impact important areas like infrastructure and taking care of the most vulnerable Ohioans.

“We have found ways and looked at modeling that we can be able to get this income tax without any cuts to those areas,” Mathews said.

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“It’s like a three-legged stool; if you only have two of those legs, it’s going to collapse,” Sweeney said. “And so, between a sales tax, income tax, property taxes, none of those should be unbalanced.”

This proposed bill would also eliminate the commercial activities tax for businesses.

“By eliminating these two revenue sources, you’re going to be putting a lot of pressure on the sales tax revenue in Ohio,” Troy said.

“We want this to be a cut, we want this to be a reduction of the taxes in your life, so it’s not just going to be a one-for-one in that way,” Mathews said.

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Troy said while the bill does not propose increasing the state’s sales tax now, local governments may be forced to make up for lost revenue by doing that or by increasing property taxes.

“We are going to end up with a trainwreck here if we don’t understand we have services we have to provide and we are shortchanging some services by saying, ‘Let’s give additional tax relief to those who need it the least,’” Troy said.

“We know that we can be better fiscally responsible,” Matthews said. “We can look at other ways of finding revenue that we’ve seen in other states, whether that’s looking at natural resources or looking at simplifying existing tax codes.”

But Sweeney said income tax is not the issue state lawmakers should be focusing on.

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“This is going to help the top earners in the state and again, whether you’re in an affluent community or an economically disadvantaged community, their biggest problems are property taxes,” she said.

Lawmakers did just decrease the state income taxes in the current budget, bringing the highest rate down from nearly 4% percent to 3.75% while eliminating a tax bracket completely.

But Troy said he worries because there was a downturn on estimated revenues on the last reporting period, and the legislature is increasing spending in certain areas, like by expanding access to the school-choice voucher program.

“That could approach, within the next year or two, an additional billion dollars of expenditures that we didn’t have before,” Troy said.

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“Right now, we are going to be looking at what communities want,” Mathews said. “The bill is only on the benchmarks of how to get there.”

The bill does have support of leadership. In a statement, Speaker of the Ohio House Jason Stephens (R-Kitts Hill) said, “One of our caucus’ top priorities has been to cut taxes. House Bill 1 was a way to flatten and simplify Ohio’s tax code, with the end goal of eliminating the state income tax. This new piece of legislation continues this priority and will go through the committee process and have plenty of deliberation and discussion.”

Other states have made up for the loss of revenue in different ways. For example, in Tennessee, residents pay the highest combined sales tax rate in the country at more than 9.5%, and in Washington, the gasoline tax is among the highest at nearly 50 cents per gallon.

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