According to data from the Ohio Department of Taxation, the state has collected similar amounts of personal income tax revenue from 2011 through 2019. The Laffer Curve, an economic theory which illustrates the relationship between tax rates and government tax revenue, may serve as a possible explanation for these results. Given that individuals often adjust their behavior as tax rates change, higher income tax rates decrease the incentive to work compared to lower rates. While previous General Assemblies should be commended for their attempts to lower Ohioans tax burdens, I believe it is time to create a long term plan to completely eliminate Ohio’s personal income tax.
My plan to complete this goal is simple. Senate Bill 327 would eliminate the personal income tax by lowering the tax rate of each bracket by 10% each year. I believe this plan is simple and provides the state a generous runway to determine the best plan to deal with the lost revenue. State income tax revenue will not simply vanish overnight. Based on the Department of Taxation’s data from 2019, Ohio collected nearly $8.3 billion meaning Ohio would save taxpayers nearly $830 million each year of the ten year phase-out. While this number may give pause to some it is not without precedent. House Bill 110 of the 134th General Assembly provided approximately $800 million in personal income tax cuts each year of the biennium. House Bill 110 also increased the bottom tax bracket amount from $21,000 to $25,000 in which a person pays zero state personal income tax. That provision should result in an additional 125,000 Ohioans receiving a 100% tax cut. While tax cuts are often seen as simply conservative, House Bill 110 was overwhelmingly approved with a bipartisan majority receiving only one “no” vote.
Ohio has also done a lot to become more competitive in attracting businesses to the state. Recently, these efforts and policies have led to major economic development projects being announced in the state. Most notably being Intel’s decision to invest $20 billion in the state as well as Ford’s announcement of a $1.5 billion investment to make electronic vehicles in Ohio. Continued economic development combined with revenues from other tax sources and cuts of some state government spending will ensure that the state is well funded throughout the ten year phase-out and well after it is fully implemented.
Opponents of this plan like to compare it to policies enacted by Kansas a decade ago. While all policy changes ought to be thoroughly examined and scrutinized, this comparison in particular is brought in bad faith. Kansas notably opted to eliminate all income taxes on small businesses as well as major reductions to state personal income tax. Senate Bill 327 only makes changes to Ohio’s personal income tax over the course of a decade. Senate Bill 327 provides a much different approach than the Kansas plan, while also giving state leaders ample time to continue to lead Ohio forward.
With Ohio’s growing, prosperous economy and robust Rainy Day Fund, this plan is sustainable and builds on the work and will of previous General Assemblies. Working class Ohioans want and deserve to keep more of their well-earned paychecks.
Stephen A. Huffman represents Ohio Senate District 5.
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