State Rep. Adam Mathews, R-Lebanon, speaks during a session of the Ohio House of Representatives at the Statehouse in Columbus, Ohio. (Photo by Graham Stokes for Ohio Capital Journal. Photo republished with original article only.)
Some Ohio lawmakers have proposed eliminating the state income tax, arguing it would bolster the economy. But a majority of economists polled on the issue disagree.
Republican lawmakers in both chambers of the General Assembly have introduced a bill that would abolish income tax and tax on commercial activities by 2030, on the grounds that it would stimulate the economy.
“Ohio is poised to reclaim our role as the economic engine of the Midwest,” State Rep. Adam Mathews of Lebanon said in a statement in January. “This move will help make Ohio a destination for businesses to grow and attract people who want to work and live here, raise families and truly thrive.”
Politicians, particularly on the right, have long argued that tax cuts have a stimulating effect on the economy.
But some economists have said it’s not that simpleThe structure of the cuts is crucial and they must be paid for with matching cuts, they say.
Furthermore, income tax cuts are often regressive, meaning they benefit the wealthy in ways that do not effectively trickle down to lower-income families. Trump’s 2017 tax cuts increased the deficit, while mainly in favor of the wealthiest Americansaccording to many analyses.
In Ohio the state is already Missing out on $1 billion a year in taxes on limited liability companies in a way that benefits mainly the wealthy. It was sold on the promise that the reduction would stimulate economic growth.
However, the tax cut for LLCs has been in effect for a decade, and the Federal Reserve Bank of Cleveland reported in March that Ohio’s economic growth peaked between the fourth quarter of 2021 and the third quarter of 2023. fifth worst of all states.
In a survey released this week, a panel of 19 Ohio economists were largely skeptical that repealing Ohio’s income tax would help the state’s economy. When asked whether they agreed that repealing it would boost growth, 11 disagreed, three agreed and four said they weren’t sure. And all but one said repealing Ohio’s income tax would make it difficult to balance the state budget.
Jonathan Andreas of Bluffton University said in the comments section of the survey that eliminating the income tax would reduce bureaucracy.
“While the federal income tax is a fairly efficient and highly progressive way to raise revenue, state income taxes like Ohio’s are relatively regressive, and Ohio’s is particularly burdensome compared to the smaller amount of revenue, since Ohio has three income taxing authorities: state, school district, and local!” he wrote. “That’s an absurd amount of bureaucracy for a much smaller amount of tax revenue than the federal government gets. I would rather see us pay just one income tax to the federal government and have states raise revenue through higher land taxes that are more efficient and about as progressive.”
But another economist, Will Georgic of Ohio Wesleyan University said Ohio’s proposal is similar to one tried in Kansas in 2012 and 2013 by former Gov. Sam Brownback. It failed to deliver the growth it promised and almost bankrupt the state.
“I think Ohio is more like Kansas than its legislators care to admit (and certainly more like Kansas than we are like Florida, Washington, Nevada, or Texas),” Georgic wrote, referring to states without income taxes. “This experiment did not work out well for Kansas.”
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The post Economic Benefits of Eliminating Ohio Income Tax Called into Question appeared first on Ohio Capital Journal.
