Income tax repeal would gut the budget to benefit the wealthiest
Posted March 10, 2024 in Op-Eds
This piece was previously published on Cleveland.com and is reprinted here with permission.
Ohio lawmakers have introduced legislation to eliminate the state’s personal income tax. This tax repeal would be devastating for Ohio.
Not only is the proposal a budget-busting blunder, but it would also make Ohio’s tax system even more inequitable.
In fiscal year 2023, the state personal income tax accounted for roughly 37% of total tax revenue brought into the General Revenue Fund (GRF). That equates to over $10.7 billion.
The tax also raised an additional $500 million for local governments and public libraries. Such an extreme tax cut would inevitably have profound real-world consequences.
In addition to your local library and governments, think of all the state services and institutions that receive their funding from the GRF: Medicaid to ensure that low-earning Ohioans and their children have access to health care, the funding to support K-12 education, the backing provided to emergency services, including police.
This legislation essentially proposes slashing the budgets of all those services and institutions by 37%.
That means less money to help mothers care for their children, less money for teachers to educate those children, less money to protect those children.
These cuts to current spending are only the tip of the iceberg. Without this revenue stream, the state would have less leeway to quickly respond to unanticipated crises.
Not only does this argument ignore decades of evidence, it also shows a complete disregard for fostering an equitable state tax system.
Ohio’s personal income tax is the only progressive tax in the state, where we ask wealthier Ohioans to pay a higher share of their income in taxes than lower-income Ohioans.
This form of taxation helps diversify revenue streams for the state, as well as offset regressive forms of taxation that have lower-income Ohioans paying a greater share of their income, such as our state sales tax.
Since 2005, state lawmakers have been eroding the personal income tax. Before the start of this generation of income tax cuts, the top marginal tax rate in Ohio was 7.5% on incomes over $200,000. For tax year 2024, that top rate will be just 3.5% on incomes above $100,000.
While the income tax used to be the greatest single revenue source for the GRF in 2005, the state now relies on the regressive sales tax for the lion’s share of its tax revenue.
Eliminating the state personal income tax would be the culmination of that practice. While the wealthy few would greatly benefit, everyday Ohioans would greatly pay through fewer and lower-quality services and higher sales taxes.