Plans have been introduced in Ohio that, if passed, could eliminate the state’s requirement for income tax.
Republican lawmakers in the House and Senate unveiled sister bills at the end of January that could see Ohio residents pay no state income tax by 2030. Plans also earmark getting rid of commercial activities tax, which is imposed on business done in the state.
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State income tax is levied on money made by workers. It is not the same as federal income tax. Only nine states in the U.S. do not have state-level personal taxes on income: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Some of these states have differing rules on taxing dividends and assets sold up to a certain value.
Currently, in Ohio, those making between $26,000 and $100,000 pay a rate of 2.75 percent in income tax. Anyone who makes more than this pays 3.5 percent. Those earning under $26,000 per year are not eligible to pay state-level income tax. While information is not available on how many people pay income tax in the state, Ohio has an estimated population of 11.8 million as of July 2023, according to the U.S. Census Bureau.
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Under one of the proposed plans, those earning between $26,000 and $100,000 will see their state income tax reduce from 2.73 percent in 2025 to 0.68 in 2029, being fully eliminated in 2030. A similar progression is earmarked for the state’s top earners, going from 3.1 percent levied in 2025 to 0.68 in 2029, and again to zero by the end of the decade.
State Senator George Lang told reporters that the bills would help Ohio “continue on the path of making Ohio the most business friendly state in the nation.” He was joined by state Representatives Brian Lampton and Adam Mathews, and Senator Steve Huffman.
“I think this is the opportunity that we need to get to to be like states like Florida and Texas,” Huffman said.
“The goal is to show that we’re business and family friendly. We know that families are the ones to best handle their dollars,” said Mathews.
University of Cincinnati Professor of Economics David Brasington said that any shortfall in funds caused by an income tax scrap is likely to be made up for elsewhere. “If you look at the states that don’t have an income tax, they tend to have higher property taxes and sales taxes to try to make up for it,” Brasington explained to Fox 19.
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Mathews admitted that lawmakers will need to find an additional $8 billion to fill the financial hole if the bills pass and become law, which he expects will be done by “unleashing the resources underneath us whether that’s natural gas or otherwise.” Newsweek has contacted Mathews for comment via email outside of normal working hours.
States without personal income tax tend to have higher taxes imposed elsewhere either by the state or localities, such as higher sales, gasoline property taxes, although this isn’t always the case.
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Lang said that $3.1 billion in tax cuts made in last year’s Ohio budget show that “businesses are coming back to Ohio at a greater pace than almost any other state in America.” Newsweek has been unable to verify this claim at this time.
