Proactive revenue agenda could provide additional funds for education and other critical services while addressing inequality
Posted January 05, 2023 in Press Releases
Policy Matters Ohio released a plan to make Ohio’s tax code work for everyday Ohioans today. The revenue plan could provide $3.6 billion for public education, health care, and local government services. Analysis shows that the plan would also reduce racial and income inequality and give working families with low and middle incomes some much needed relief.
“We have all the resources we need to build a more prosperous Ohio — it’s a matter of how our elected officials choose to allocate them,” said report co-author Guillermo Bervejillo, Ph.D. “Too many Ohio politicians try to pit communities against each other based on race or place — hoping we won’t notice as they rig the tax code to line the pockets of their wealthy, corporate donors. The result is deeper racial and income inequality, and more communities with fewer resources to expand opportunity for residents. Policymakers can start to reverse course by embracing our tax plan.”
The revenue agenda consists of four main components:
- Restoring the personal income tax to 7.5% on income above $250,000 and boosting it to 8.99% on income above $1 million — a move that would provide $2.7 billion a year.
- Reinstating Ohio’s corporate income tax at 8.5%, which corporations would pay if it were higher than their existing commercial activity tax. This policy could raise about $1 billion a year.
- Closing the LLC loophole — which allows certain business owners to avoid paying taxes on their first $250,000 of income and to pay a low flat tax rate on income above that. This tax break costs Ohio about $1 billion a year.
- Giving a needed boost to low- and middle-income Ohioans. The agenda would make the state earned income tax credit refundable, so the people with the lowest incomes benefit from it. It would create a state thriving families tax credit of $700 per child under the age of 18 for households with incomes below $65,000, phasing out for those with incomes below $85,000. Together, these credits would cost about $1.1 billion a year.
Setting aside the corporate income tax, the agenda would reduce average taxes for the 80% of Ohioans with incomes below $107,000. Ohioans in this group would pay an average of $212 less a year. Among that group, Black and Latinx people will pay an average of $294 and $354 less, respectively. Black and Latinx Ohioans are more likely to have lower incomes due to workplace discrimination, unfair lending practices, and many other factors. Only 10% of Ohioans would see a tax increase and 95% of the increases would be paid by the richest 5% of Ohioans.
“Ohioans have endured failed tax-cutting policies for too long and the results are in,” Bervejillo said. “In nearly every metric, from infant mortality to college attainment to job creation, we’re trailing the nation. Ohio has enough for all of us to live a happy, healthy life. It’s time to stop handing over our shared resources to the wealthy few, but instead use them to do the most good for the most people.”