Bolster the income tax to meet Ohio’s needs
Posted February 06, 2012 in Press Releases
Report outlines what higher rates on top earners would mean
A research brief released today by Policy Matters Ohio analyzes a proposal that would reinstitute the state income-tax rate of 7.5 percent on income over $250,000 and implement a new, 8.5 percent rate on income over $500,000. This combination would generate about $650 million annually, according to an analysis by the Institute on Taxation and Economic Policy (ITEP), a national research institute with a sophisticated model of state and federal taxation system
That would allow the state to reverse nearly half the cuts made to public schools and local governments in the current two-year budget. Those cuts are hitting Ohio’s schools and communities hard, prompting teacher layoffs, undercutting public health and leaving some local governments struggling to maintain their police levels.
Just 1.3 percent of Ohio’s taxpayers would be affected by such tax-rate changes, and the vast bulk of the increase would be paid by taxpayers in the top 1 percent of the income spectrum, who are expected to make more than $340,000 this year. The increase amounts to just 1.2 percent of the group’s average income of $981,000. Even after the proposed changes, taxpayers in the top 1 percent on average would pay a smaller share of their income in state and local taxes than those earning a tenth as much.
This proposal would not change the amount of taxes paid by nearly 99 percent of Ohio taxpayers. It would affect only the most affluent, who can most afford to pay, and the increases for them would be relatively small.
“Public services, though sometimes invisible, are a crucial element in a thriving economy,” said Zach Schiller, report author and Policy Matters research director. “To restore critical services and invest in the future, Ohio should boost income-tax rates on its highest earners.”