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April 22nd, 2013 By German Lopez | News | Posted In: News, Budget, Taxes

Policy Group: Ohio House Tax Plan Favors Wealthy

Policy Matters finds reworked plan gives biggest bonuses to top 1 percent

ohio statehouseOhio Statehouse

The budget bill currently working through the Republican-controlled Ohio legislature would cut taxes in a way that disproportionately favors the wealthy, according to a new analysis from Policy Matters Ohio, a left-leaning policy group.

The budget bill, which was passed the Republican-controlled Ohio House with a 61-35 vote on April 18, would cut state income taxes for all Ohioans by 7 percent. Policy Matters analyzed the result for each tax bracket: For the top 1 percent, the tax plan would cut $2,717 in taxes on average. For the middle 20 percent, it would amount to a $51 cut on average. For the bottom 20 percent, it would result in $3 on average.

The report explains the disproportionate gains are caused by the structure behind Ohio’s tax system: Ohio has a graduated income tax, so people pay more on higher levels of earnings. Because of that, across-the-board tax cuts give much more money to the wealthiest Ohioans. This reinforces inequality and adds to the unfairness of the state and local tax system, which is weighted in favor of upper-income taxpayers when all state and local taxes are taken into account.

Zach Schiller, research director at Policy Matters, says the Ohio House tax plan will also have little impact on Ohio’s economy.

“Since the 21-percent reduction in state income taxes approved in 2005, Ohio’s economy has underperformed the nation,” Schiller said in a statement.

“There is little reason to believe that another round of income-tax cuts will produce a different result.”

Michael Dittoe, spokesperson for Speaker of the House William Batchelder and Ohio House Republicans, wrote in an email to CityBeat that there are still two months for the state government to finalize the details of the tax plan as it works through the Ohio legislature.

The budget bill still has to be approved by the Republican-controlled Ohio Senate. If changes are made to the Ohio House proposal, the Ohio Senate bill would have to be concurred by the Ohio House. It would then need to be signed by Republican Gov. John Kasich, who could line-item veto certain parts of the bill or veto the entire bill.

“It’s disappointing to see that Policy Matters Ohio would begrudge an income tax cut which will benefit all Ohioans,” Dittoe wrote in the email. “Of the seven citations in their report, ironically, five of them refer back to previous ‘studies’ issued by none other than Policy Matters Ohio. Before issuing a study of this magnitude, it may be wise for them to cite something other than themselves to make the report more credible.”

Policy Matter’s findings were gathered through the independent Institute on Taxation and Economic Policy, which plugs the numbers into its own model to gauge the impact of tax cuts on different income levels.

The resulting numbers do little to deflate concerns raised by Policy Matters about Kasich’s tax proposal, which was a much larger 20-percent across-the-board income tax cut. Policy Matters found Kasich’s tax plan also favored the wealthy, except the overall plan actually raised taxes on the state’s poorest because it included an expansion of the sales tax that the Ohio House rejected (“Smoke and Mirrors,” issue of Feb. 20).

 
 
 
 
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