Ohio taxes shift away from wealthy, again
Posted August 08, 2019 in Press Releases
Budget bills bring average tax increases for less affluent residents
The main tax measures in Ohio’s new budget bills will bring tax increases on average for lower- and middle-income taxpayers, while those at the top of the income scale on average will see cuts.
That's the key conclusion of an analysis by the Institute on Taxation and Economic Policy (ITEP), a Washington, D.C. nonprofit with a sophisticated model of the tax system, released today by Policy Matters Ohio. The combined effect of higher fuel taxes and required collection of sales tax by out-of-state online retailers will more than offset income-tax cuts the General Assembly has approved this year.
For most tax filers, the changes are relatively small, amounting to less than 0.2% of annual income. The poorest fifth of taxpayers, with income below $24,000 a year, will see an average increase of $2, or 0.02% of income, while those in the top 1%, making $496,000 or more, will see an average cut of $746, or 0.06% of income. Middle-income tax filers who make between $42,000 and $63,000 a year will average a $93-a-year increase, or 0.18% of income.
“Both the fuel tax increases and online sales tax moves were needed – the first to provide badly needed revenue to bolster the transportation system and the second to level the playing field between online and brick-and-mortar retailers,” said Zach Schiller, research director of Policy Matters. “While needed steps, together with the income-tax cuts, they reinforced the long-term pattern of shifting taxes away from the most affluent Ohioans. This illustrates the need for larger policies that will address the fairness of the Ohio tax system, including ending the business income deduction and making the EITC refundable.”
ITEP modeled the increases in fuel taxes and the state EITC in the transportation budget, along with the operating budget’s cuts in rates and brackets in the state income tax, the suspension for one year of indexing income-tax brackets and personal exemptions to inflation, and new sales-tax collection requirements for online retailers.