A February 2022 report by Policy Matters Ohio and the Institute on Taxation and Economic Policy discusses the effects of Ohio’s 2005 budget bill and how it resulted in an “upside-down tax code.”
TOLEDO, OH, April 01, 2022 /24-7PressRelease/ — A February 2022 report by Policy Matters Ohio and the Institute on Taxation and Economic Policy discusses the effects of Ohio’s 2005 budget bill and how it resulted in an “upside-down tax code.” The report shows how, on average, 60% of Ohioans with the lowest incomes ended up paying more in taxes than they had prior to 2005. In turn, those in the top-20% of income paid significantly less.
Because of this, Ohio misses out on about $8 billion in revenue each year, resulting in less funding for schools, health care, and community needs.
Guillermo Bervejillo, state policy fellow at Policy Matters Ohio and the report’s author, points out that the common argument for lowering taxes is to spur economic growth. He then makes a case for this being a false assumption, often based on faulty analytical models. He states, “The idea is that businesses will be able to create more jobs because they have lower taxes. The truth is that Ohio lags the national averages in terms of job growth and job creation, in terms of GDP, and all these types of indicators.”
The report examines the effect of the tax code changes and discusses what the author sees as needed reforms. “We have repeatedly argued that we need a progressive taxation system, meaning that people pay according to their ability,” said Bervejillo. “We need to tax corporate profits, and we need to make sure that the state has the resources to provide a thriving society.”
Ohio’s most recent budget bill continues to benefit wealthier Ohioans by removing the top bracket and reducing the maximum tax rate more. The author points out, “Since 2005, 76% of the total value of all personal income tax cuts has gone to the wealthiest 20% of Ohio households; 31% to the richest 1%. The richest 20% of Ohio’s households received an average tax cut exceeding $5,800.”
The approach policymakers have made is they have shifted the tax code to rely more heavily on sales, excise, and business taxes. This results in an average increase for nearly all Ohio households, and 20% of Ohioans with the lowest incomes are now paying an average of $164 more a year in overall state taxes than they did 17 years ago.
This type of tax scheme is ultimately unsustainable. The author points out that Ohio has enough wealth for every community to have better schools, quality health care, well-run public transit systems, and safe roads and bridges. Instead, the propping up of a small number of wealthy individuals and corporations means these goals become less attainable.
Bervejillo closes his report by stating, “Regular Ohioans can bear no more of this type of tax legislation. Instead, state lawmakers should ensure that the state has the resources to provide a thriving equitable society for generations by constructing a taxation structure in which Ohioans contribute according to their ability.”
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