![]() By comparison, the House-proposed income tax reductions were estimated to reduce general revenue fund (GRF) tax revenue by $338 million for the biennium and the Senate-proposed income tax cuts would have reduced GRF tax revenue by an estimated $540 million for the biennium. LSC estimates the total cost of the HB 110 tax reductions at $1.643 billion for the biennium ($885 million in FY22 and $758 million in FY23). By lowering the tax rates paid by Ohio’s highest income earners much more than on lower income earners, the FY22-23 state budget has reduced progressivity and made Ohio’s state income tax less equitable. Income of persons earning more than $221,300 is now taxed at the same rate (3.99%) as that of persons with income between $110,650 and $221,300, which amounts to a 16.8% decrease from the 2020 rate of 4.797%. However, HB 110 also decreased the tax rate on the second highest income bracket ($110,650-$221,300) by 9.6% and completely eliminated the highest marginal tax bracket (income greater than $221,300). These two changes are similar to those made two years ago in HB 166 and by themselves would have resulted in a modest increase in the progressivity of Ohio’s income tax structure (by increasing the number of persons who owe no state income tax). ![]() HB 110 increased the zero bracket minimum income from $22,150 to $25,000 and provided 3% rate reductions for the three lowest tax brackets. However, the final version of the FY22-23 budget included a much larger income tax reduction than that proposed by either the House or Senate. The Senate proposed a similar across the board reduction, with a 3.5% decrease in bracket rates in 2021 followed by a 1.5% decrease in 2022 for a total reduction of 5% in bracket rates over the biennium. The House FY22-23 budget proposed an “across the board” 2% reduction in Ohio’s 2021 marginal tax rates while maintaining the same “five bracket” structure created in HB 166 (the FY20-21 budget bill). House Bill (HB) 110, the FY22-23 state budget bill, enacted additional changes to Ohio’s income tax rates and structure. As a result of these repeated reductions, Ohio’s income tax rates have been below their original 1972-1982 levels since 2015. Additionally, Ohio’s income tax rates have been permanently reduced eight times since 1985 (15 times if you count each of the number of yearly reductions as some of the decreases were phased in over multiple years), as well as five temporary income tax cuts which were implemented each year from 1996-2000. In 1993 a ninth income bracket for those with income over $200,000 was added. The original rates and six income brackets were unchanged from 1972-1981 however, income tax rates were increased three times from 1982-1984 in the aftermath of the severe recession in the early 1980s and two additional rate brackets were added at higher income levels (incomes higher than $80,000). Ohio’s income tax has undergone a host of changes since its introduction in 1972. As a result, the personal income tax is the largest driver of equity in Ohio’s state tax structure. Furthermore, Ohio’s state sales tax is considered by economists to be “regressive” despite its uniform rate because lower income persons typically spend a greater proportion of their income on taxable goods and therefore will pay a greater proportion of their income in sales tax. Economists regard a progressive rate structure as more equitable than a structure where all taxpayers pay the same rate (this is often referred to as a “flat rate” income tax). This means that the tax rate increases as income increases. The Ohio income tax was designed with a “progressive” rate structure. Ohio’s state income tax on personal income was established in 1971 to be effective on January 1, 1972. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |