Fact Check: Is the Ohio Income Tax Too High?
BELIEF: The Income Tax is Too Darn High RATING: Limited View of Reality(Read the Different Ratings and other Fact Checks)
Ohio’s Governor and others claim that our income tax is too high. However, we are unsure as to why this is the belief. The income tax in Ohio is the only tax levied based on a person’s ability to pay for great public services like schools, public safety, parks, and our libraries. For the value we all receive, Ohioans receive a great return on our income tax investment.
As we compare our tax rate to other states, we actually find that we are not that high. In fact, Ohio’s tax amount is fairly average. However, our goal should not be a race to the bottom. Asking if our tax rate is high or low is not the question we need to ask. Instead, Ohio should ask what types of great public services we want and build our tax system to finance these services adequately.
The Governor and others don’t paint an accurate picture when they discuss our income tax by only discussing the top tax rate of 5.9%. This rate applies only on incomes over $204,000—which very few Ohioans pay. Most Ohioans pay a rate closer to 3%, because of our graduated income tax structure. Ohio has 9 different income tax brackets. The first $5,200 everyone earns in Ohio is taxed at only .587%, then income from $5,201-$10,200 is taxed at only 1.17% and so forth up to the $204,000 level at 5.9%.
It is difficult for a direct comparison of states from all vantage points, because different tax rates kick in at different dollar levels in different states. For example Oklahoma has a lower top tax rate than Ohio at 5.5%, but this rate kicks in at $15,000. While we have a higher top rate, our average rate is much lower. While different states have their top tax bracket kick in at income different levels, 28 states have a higher top tax rate than Ohio.
Compared to other states, Ohio’s income tax is average. Seven states have a flat tax, where everyone pays the same percentage on all of their income. While this may lessen the tax bill substantially on the wealthiest residents, it raises the tax rate for low and middle-income residents. Over 70% of Ohioans pay less than 3.4% compared to Michigan 4.33%, Illinois 5.0%, Colorado 4.63% and Pennsylvania 3.7% where all residents pay a higher rate on all of their income. It is misleading to discuss only the top tax rate in Ohio of 5.9% because most Ohioans come nowhere near this rate.
We need to ask why organizations and individuals are so set on cutting and eliminating income taxes. Moderate and even high state income taxes do not harm business. Of the nine states without an income tax, there has been no common trend of economic improvement. In fact, some states without an income tax like Nevada, have continued to perform very poorly and lack the resources to invest in great public services. Some states with much higher income taxes continue to grow and out perform others economically. Cutting the Ohio income tax will not help the economy and will hurt our communities. The income tax is the only tax based on a person’s ability to pay, and therefore should be designed to generate the needed revenues for great public services that will lead to a stronger Ohio.