Ohio Passes Largest Personal Income Tax Cut in State’s History

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Posted by Doug Kellogg on Tuesday, June 29th, 2021, 6:26 PM PERMALINK

The final biennial budget in Ohio includes a $1.6 billion reduction in the state income tax – the biggest income tax cut in a two-year budget in state history.

Ohio Republicans crafted a budget that eliminates two income tax brackets over 4%, and makes the top rate 3.99%. The state has eliminated multiple tax brackets over the past two budget cycles, heading towards a flat tax.

The budget also raises the minimum income that is subject to income tax to $25,000 per year. Moving forward, anyone making less than $25,000 will owe no income taxes in Ohio, and all taxpayers will pay zero tax on their first $24,999 in earnings.

All Ohio taxpayers will benefit from a 3% across-the-board reduction in income taxes.  

“Ohio Republicans have earned thanks from all taxpayers for passing this significant tax relief. Families and businesses will keep more of their hard-earned money, have a simpler tax code, and get needed protections from cities taxing them when they don’t live or work in the city. On top of that, parents will enjoy more school choice," said Americans for Tax Reform President Grover Norquist.

On top of the income tax savings, the Senate “repealed sales taxes on hiring and recruiting companies that work to fill job openings around the state.”

The Senate and House compromised on a 3% income tax cut, the initial Senate proposal was 5%, and House 2%.

These tax reforms are a massive win for Ohio, and will make the state much more competitive in attracting new workers, new investment, and new jobs. In particular, Senate Republicans under Senate President Matt Huffman, and previous Senate President Larry Obhof, have led on tax reforms, and pro-worker occupational licensing reform, and regulatory reforms, that also boost the state’s economy. Representatives Bill Roemer, Derek Merrin, and more have championed tax relief to make the state more competitive and friendly toward job-creation.

Given Ohio’s many local taxing jurisdictions, the state legislature’s strong example is doubly important for driving growth in the Buckeye State.

The budget includes protections for Ohioans who are working from home, so they don’t end up paying taxes to cities where they no longer work. Taxpayers can get a refund, at least on 2021 taxes that have been withheld. Addressing the issue of remote taxation is vital at the state and local level, to keep governments from reaching outside their jurisdictions to tax workers.

The new budget does include changes to the education aid formula which taxpayers will need to watch closely to ensure excessive spending levels do not result.

Back on the positive side, the budget expands school choice options, adding ESAs, and offers a small tax credit for private school tuition, further empowering Ohio families, not teachers’ unions, to guide their child’s education.

A measure to block local governments from running broadband networks was removed, one of the few negatives in this budget. Instead, following Governor DeWine’s push for more spending on broadband expansion, $250 million will be unnecessarily spent by the state on broadband. The reality is, the private sector is spending trillions of dollars to expand broadband access, and government interference is simply not required.

Republican legislators who have championed relief for Ohio taxpayers deserve immense credit for this successful budget. The state continues to advance reforms that make it ready to compete with its neighbors, create jobs, retain talent, a grow.  

“With the Governor’s signature, the Buckeye State will become a better place to raise a family, and a more attractive place for businesses and workers," added Norquist.

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