Policy Matters’ revenue proposal would rebuild Ohio’s schools, public health and more
Posted October 15, 2020 in Press Releases
In a virtual press conference today, Policy Matters Ohio unveiled a proposal to clean up and rebalance Ohio’s upside-down tax code. By adopting the plan, Ohio lawmakers could direct $1.94 billion in public resources to shore up the state budget weakened by the pandemic recession, and ensure all communities have the resources they need to recover and rebuild. Watch a recording of the call here.
This plan, together with Policy Matters’ July proposal to close some of Ohio’s unnecessary tax loopholes, would generate $2.5 billion, more than Ohio’s projected $2.4 billion shortfall for fiscal year 2021. In May, Gov. Mike DeWine cut $776 million from the 2020 state budget. If Gov. DeWine and Ohio lawmakers choose to respond to the 2021 shortfall by reducing support for critical programs, they will hurt struggling families and eliminate good public sector jobs that stabilize many middle-income households. Instead of making cuts, Policy Matters Senior Project Director Wendy Patton said Ohio policymakers should close tax breaks and reverse tax cuts on the affluent that drain resources from Ohio’s communities.
“State policymakers have chosen to prioritize tax cuts that primarily benefit the wealthy few and corporations – cutting $7 billion a year from the state budget over the past 15 years,” Patton said. “As a result, Ohioans entered the pandemic recession without enough public resources to help everyone make it through this difficult time. The last thing Ohio needs is more budget cuts, like after the last recession, which contributed to a long, slow, painful recovery. We need restoration and reinvestment.”
Today, the wealthiest 1% of Ohioans pay just over $40,000 a year less in state taxes, on average, than they did in 2005, people in the middle pay about the same and at the lower end, they pay more. According to the Institute on Taxation and Economic Policy, which has a model of the state tax system, the poorest Ohioans pay almost double the share of their income in state and local taxes as the wealthiest.
Sheila Reynertson, Senior Policy Analyst with New Jersey Policy Perspective, joined the press conference to outline a similar proposal recently signed into law by the governor of New Jersey. The law created a new tax bracket for New Jersey’s wealthiest earners.
“We have so much in New Jersey we should be valuing,” she said. “Our assets are so important to high income households and businesses. We have excellent education which ensures an educated workforce. We have great roads and businesses to ensure the movement of goods and services. We have excellent higher education. We really push the idea that this is what keeps people in New Jersey.”
President of the Ohio Federation of Teachers Melissa Cropper discussed how the proposal would help Ohio’s public schools address increased costs during the pandemic and recession while also ensuring all communities have quality public schools, no matter their race or income.
“Funding is a matter of priorities,” Cropper said. “This Policy Matters report shows that if the state would simply shift its priorities from creating tax breaks for the wealthiest Ohioans to creating opportunities for our poorest children, we could generate $1.9 billion that could be invested in our education system. And it is a win-win for all involved. By putting this money towards education, we are investing in a future workforce that will help our businesses succeed and stimulate the economy.”
Policy Matters’ proposal would:
- Reduce the business income deduction, often known as the LLC loophole, from $250,000 to $100,000 and eliminate the preferential lower rate on income over the cap.
- Restore the rate on the top income tax bracket to 7.5%, as it was under Republican, Gov. George Voinovich. This bracket applies only to income over $221,300 in 2020.
- Create a new tax bracket with a rate of 8.5% on income over $500,000.
- Add a 10% refundable option to the state Earned Income Tax Credit (EITC) to give low-income working families a boost.