Ohio gives special tax treatment to payday lenders and mortgage brokers – they pay a lower state tax rate than banks under an outmoded tax unique to Ohio. Lobbyists and debt collectors don’t have to bill their clients for sales tax. The state recently made it much easier for high-income retirees who spend part of the year out of state to avoid paying Ohio income tax. These tax breaks, which together cost the state more than $65 million a year, are among those that are squeezing the state budget even as it is feeling more stress from the weakening economy.

They are among 12 tax breaks identified in this September 2008 report whose elimination or limitation would both make the state tax system fairer and generate up to $270 million annually in revenue for needed investments. These tax breaks are unwise in good times and unaffordable now, when important state services are being cut because of budget problems. In this report, Policy Matters has only begun to identify tax breaks that should be scrapped or limited. Beyond closing these loopholes, the report recommends that the state conduct a regular review of all the tax breaks embedded in Ohio law. It also calls for the state to review which services should be covered by the sales tax.

This report was prepared with financial support from The Center for Community Solutions. The conclusions and opinions do not necessarily represent those of The Center for Community Solutions.

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2-Page Fact Sheet: Tax loopholes are expenditures

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