Ohio Republicans introduce measure to flatten income tax to 2.75%
Ohio Republican lawmakers have introduced a bill to implement a flat income tax of 2.75%, claiming the measure would help Ohio compete with surrounding states and keep residents in the state.
Policy advocates and Democratic legislators pushed back on that idea, saying the move wouldn't help relieve property tax struggles and would mean the loss of necessary government services due to lost revenue.
State Reps. Adam Mathews, R-Lebanon, and Brian Lampton, R-Beavercreek, presented their plan to the Ohio House Ways and Means Committee on Wednesday to phase in the 2.75% flat tax over the next two years, by way of House Bill 30.
'This bill builds upon the work of previous General Assemblies to simplify and reduce the tax burden on Ohioans and ensure our state remains a destination for businesses to grow and attract people wishing to work, raise a family and truly thrive here,' Lampton told the committee.
Under the bill, 2025 non-business income tax would be reduced for the top income bracket – those making more than $102,400 – from 3.5% to 3.125%, with the bottom income bracket staying at 2.75%. In 2026, the top tax bracket is dropped further to 2.75%, matching that of the lower brackets.
According to the Legislative Service Commission breakdown of the bill, the tax for business income would remain at 3%.
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In comparison with Pennsylvania's 3.7% income tax and Indiana's 3% rate, lowering Ohio's rate as laid out in H.B. 30 would 'put Ohio in a position to lead the Midwest with a lower tax than our neighbors, thereby making us an economic model for the region,' Mathews said.
Democrats on the committee questioned the move, especially as discussions of staggering property tax rates in the state are a top priority for constituents who reach out to their legislators.
'The one thing we are constantly hearing about is 'do something about property taxes,'' said state Rep. Daniel Troy, D-Willowick. 'This change of dropping the tax rate some more, it basically takes away the revenue that's needed for property tax relief.'
Tax collections from the state General Revenue Fund feed the Public Library Fund as well, which has seen a $27 million drop in the last budget, and library systems are struggling to get by as they await the next budget decisions related to their state funds and potential federal cuts.
State Rep. Elgin Rogers, D-Toledo, pointed to that loss as another way the flat tax could cause damage, along with cuts to other important government services.
'Everyone wants their taxes cut,' Rogers said. 'With that, there are cuts in government services and also, we want a strong Ohio that's educated, and it's my belief that this will have a a negative impact on the Public Library Fund.'
Republicans on the committee seemed supportive of the bill, with state Rep. Steve Demetriou, R-Bainbridge Twp., laying out a different outlook on the tax changes.
'When we're talking about taxes, this money doesn't belong to anyone else except the taxpayer,' Demetriou said. 'It doesn't belong to the state, it doesn't belong to the libraries, it doesn't belong to the schools. It's their money, so we're just helping get more of that back into their pockets.'
The think tank Policy Matters Ohio released information about House Bill 30 just before the measure had its first committee hearing. An analysis of the bill from the group found the bill would 'tax the income of everyday Ohioans at the same rate as the state's wealthiest households.'
'With H.B. 30, librarians and school teachers will pay the same tax rate as professional athletes and corporate CEOs,' according to Bailey Williams of Policy Matters Ohio. 'A flat tax is a handout to the most well-off among us – and it will devastate Ohio's ability to provide services that benefit everyone.'
Citing the Institute on Taxation and Economic Policy, the think tank said H.B. 30's tax changes would cost the state an estimated $1.1 billion, with more than 98% of that going to Ohioans with income in the top 20%.
The Public Library Fund and the Local Government Fund were both mentioned by Policy Matters as pots of money that would be reduced, thereby shifting the burden onto taxpayers through local property tax levies.
Public libraries have been vocal about the need for more state support to keep up with inflationary costs and the rising demand for the many services Ohio libraries provide to their communities, from literature and materials to social services and tax help.
Lampton told the committee the tax changes wouldn't necessarily mean a reduction in the overall General Revenue Fund, and 'to say it will cut library spending may or may not be a direct result of that.'
H.B. 30 will be subject to further hearings in the House Ways and Means Committee, including opportunities for testimony for and against the measure.
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