A fair and adequate tax system for Ohio
Posted January 16, 2014 in Press Releases
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Our recommendations for a smarter Ohio tax system include: maintaining and strengthening the state income tax; reviewing, eliminating and sunsetting tax expenditures; restoring the business share of Ohio taxes; and modernizing the system so it covers today's economy.
Ohio’s overall tax levels are about average. But like most states, Ohio’s tax system is weighted in favor of the most affluent. State and local taxes represent a larger share of poor and middle-class Ohioans’ income than they do of the richest residents. State policy over the past decade has worsened this disparity. At the same time, the state has reduced revenue by about $3.5 billion a year through cuts in the income tax and business taxes, and the repeal of the estate tax. This has slashed resources available for needed investments in education and human services, while money has been taken from local governments to help pay for the tax cuts. Ohio needs a state and local tax system that is equitable, provides adequate revenue, and is adapted for today’s economy.
Tax cuts have been sold as a magic potion for Ohio’s economy, but that approach hasn’t worked: www.policymattersohio.org/jobwatch05-apr2013. Taxes simply aren’t the huge factor in generating prosperity that they are often made out to be. Investments in education are more important: www.epi.org/publication/states-education-productivity-growth-foundations/. The steps cited below would strengthen and modernize Ohio’s tax system.
Maintain and strengthen the state income tax. As in most states, Ohio’s graduated income tax means higher earnings are taxed at a higher rate. It is the only major tax based on the ability to pay. Expected to generate more than $16 billion in the current, two-year state budget, it is a crucial source of support for schools, libraries, human services and public safety, as well as for paying state debt that allows us to build or renovate roads, college buildings and community projects: www.policymattersohio.org/strong-income-tax-feb2012. The General Assembly should increase income-tax rates on the most affluent, starting with restoring the 7.5 percent rate on annual income over $250,000 and creating a new 8.5 percent bracket on income over $500,000.
Review tax exemptions and credits, sunset all tax breaks, and eliminate unproductive ones. Ohio officially has 129 of these “tax expenditures” as they are known, because they are a form of state spending. Already worth more than $7 billion annually, more are added each year: www.policymattersohio.org/tax-breaks-aug2013. Some are worthwhile, while others