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From The Vaults

Kasich Proposes Tax Cuts For Wealthy — Tax Increases For Poor and Middle Class

The new two-year budget just released by Ohio’s Governor John Kasich proposes to reduce income taxes by 17% and increase sales taxes by .5%.  This tax change will result in tax cuts for the wealthy and tax increases for the poor and middle class. The State Assembly must approve a state budget by July 1.

Under Republican control, Ohio taxes have become increasingly regressive — starting with the big tax cuts in income tax that started in 2005 (See: Ohio’s 2005 Tax Reduction Law Diminished, By 21%, The Progressivity of Ohio’s Tax Code) — causing a big budget gap (argued to be $8 billion) that Kasich corrected by cutting payments to local governments.  Policy Matters states: “Tax reductions over the past dozen years cost $3 billion annually in revenue, helping create a budget crunch that could have been avoided. Local governments, are working with $1.2 billion less in 2017 than seven years ago due to changes in state revenue-sharing and tax policies.”

In 2005, Ohio’s tax rate for top incomes was 7.5%.  If Kasich’s proposal is approved the top rate will be 4.33%

The tax cut in 2015, cut taxes by nearly $1.9 billion.  Policy Matters states: “The Institute on Taxation and Economic Policy found that the top 1 percent on average would see an annual tax cut of more than $10,000. For the middle fifth of Ohioans, the savings averages $20. And for the lowest-earning 20 percent, who made less than $20,000 in 2014, it amounted to an average tax increase of $20. Most Ohioans, in short, are getting little or nothing from these tax cuts.”

The 17% tax cut proposed by Kasish will continue the Republican policy of making Ohio’s tax system more and more regressive — the lower one’s income, the greater the proportion of income must go to state and local taxes.  The chart below was prepared by the Institute on Taxation and Economic Policy and doesn’t include the impact of the Kasich proposal.

Chart supplied by The Institute on Taxation and Economic Policy

Chart supplied by The Institute on Taxation and Economic Policy

 

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