WFCN –
Legislators in Ohio have voiced their belief that doing away with the state income tax would be good for business. Nonetheless, most economists who were polled on the subject have the opposite view.
The Republican-controlled General Assembly has introduced a plan to repeal the income tax and the tax on business operations by the year 2030 in the hopes of boosting the economy.
State Representative Adam Mathews of Lebanon made the following comment in January: “Ohio is ready to reclaim our role as the economic engine of the Midwest.” “By taking this step, we promise that Ohio will continue to be a great place for businesses to expand and for families to settle down and prosper.”
That tax cuts stimulate the economy is a long-standing argument among politicians, especially conservatives.
That being said, not all economists have come to the same conclusion. Crucial as the cutbacks’ structure is, they argue, spending cuts must accompany them in order to pay for them.
The affluent reap the greatest benefits from income tax cuts, while lower-income people see less of a trickle-down effect. A number of studies have shown that the tax cuts enacted by Trump in 2017 greatly increased the national debt while mostly benefiting the wealthiest Americans.
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One Ohio state is already giving away a billion dollars in tax revenue from LLCs in a manner that mostly helps the rich. Economic growth was touted as an advantage in selling it.
But the LLC tax decrease has been around for a while, and Ohio had the fifth-worst economic growth from Q42021–Q2023, according to a March analysis from the Federal Reserve Bank of Cleveland.
Recent research from a group of 19 Ohio economists casts doubt on the idea that doing away with the state’s income tax would be good for business.
On the question of whether or not this removal would promote growth, eleven respondents were in disagreement, three were in agreement, and four were unsure. With the exception of one, every single Ohioan has voiced concern that doing away with the state income tax would exacerbate the funding gap.
A Bluffton University professor named Jonathan Andreas suggested in the survey’s comment section that doing away with income taxes would simplify government.
“While the federal income tax is known for its efficiency and progressive nature, state income taxes, such as Ohio’s, are viewed as more regressive. It is worth noting that Ohio’s system is further complicated due to the fact that it involves three different income tax authorities: state, school district, and local!” he wrote.
A far lower percentage of the population pays taxes, yet there is an incredible amount of red tape to deal with. A more efficient and progressive method of raising money would be to have the states rely on increased land taxes rather than individual income taxes.
Will Georgic, an economist at Ohio Wesleyan University, was critical of the Ohio plan, saying it was too similar to one that former Kansas governor Sam Brownback had already considered. In addition to almost bankrupting the state, it failed to bring about the anticipated growth.
“I believe that Ohio is closer to Kansas than its legislators would like to acknowledge (and definitely closer to Kansas than we are to Florida, Washington, Nevada, or Texas)” Georgic stated, alluding to states that do not tax income. For Kansas, this experiment was a failure.