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Government & Politics

Think Tank Says Budget's Income Tax Cut Won't Help Most Ohioans

empty Ohio Senate chamber
Dan Konik
/
Statehouse News Bureau
The Ohio Senate chamber sits empty. The state legislature passed the two-year budget bill Monday that includes an income tax cut, which Policy Matters Ohio says mostly benefits the wealthiest of Ohioans.

The 3% across-the-board income tax cut in the state budget, along with other tax changes, won’t do much for people making less than $110,000 a year, according to an analysis by a liberal leaning think tank.

The Policy Matters Ohio report shows people making more than $550,000 annually will get a tax cut of $5,400.

And researcher Zach Schiller said those making between $40,000 and $65,000 a year will get an average of $49.

“As with income tax cuts in general, but in particular with this one, this is a gift to the most affluent people in Ohio. And it's an expensive gift because altogether these tax cuts are going to cost $1.7 billion,” Schiller said.

And Schiller said the lowering of the tax rate paid by people making more than $221,300 in annual income is an extra bonus. The budget would drop that top bracket and make the marginal tax rate paid by all Ohioans making over $110,651 a year from 4.413% to 3.99%.

A chart from Policy Matters Ohio on their analysis of the impact of the income tax cuts in the fiscal year '22-'23 state budget.
Credit Policy Matters Ohio
A chart from Policy Matters Ohio on its analysis of the impact of the income tax cuts in the fiscal year 2022-2023 state budget.

Schiller said people earning less than $22,000 a year don’t pay income taxes so they won’t benefit from the 3% tax cut. The new budget raises that lowest bracket to $25,000 annually.

Senate President Matt Huffman (R-Lima) noted that he thinks this tax cut “is the largest personal income tax cut in the history of Ohio."

The cut comes after the state showed a surprise surplus in revenue, $3 billion more than what was estimated during the pandemic. Much of that comes from federal COVID stimulus money, including funds to governments as well as to individuals in bonus checks.

Gov. Mike DeWine had cautioned lawmakers to view this as one-time money. During debate on the budget, Senate Finance Chair Matt Dolan (R-Chagrin Falls) said the federal money is going to infrastructure investments, such as water quality and brownfields improvement, demolition of blighted buildings, and $250 million to broadband.

A lawsuit filed by Attorney General Dave Yost sought to challenge the provision in the American Rescue plan that federal COVID dollars could not be used to finance tax cuts by states.
Copyright 2021 The Statehouse News Bureau. To see more, visit The Statehouse News Bureau.