State Income Tax Cuts On The Way

State lawmakers are cutting Ohioans’ tax burden by $2 billion in a move included in the new state budget adopted this week and being signed by Gov. Mike DeWine.

Rep. Kyle Koehler, R-Springfield, said it will not only help families but also the state’s economic future. He added that it would make Ohio even more attractive for people who live in high tax states and may be thinking of moving.

“I think it’s important to make Ohio a place where people want to live, raise families and work and this will do that. It’s a three percent tax cut. It makes the highest marginal rate less than four percent. That’s what we want. We want people from New York and California to come to Ohio,” Koehler said.

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An earlier version of the state budget bill had a cut of five percent, but budget talks between the Ohio House and Senate delivered a plan with the three percent cut.

A year ago it did not appear to be likely that by budget time the state would be making cuts. Instead, thanks to the COVID crisis, Ohio’s economy began to tank. Gov. Mike DeWine put on a state employee hiring freeze and talked about the possibility of dipping into the state day fund. DeWine resisted the urge by some lawmakers to open the floodgates of reserve money for state spending. Instead, the state made use of federal funding to weather the financial storm, along with a conservative fiscal plan from the DeWine administration.

Rep. Phil Plummer, R-Dayton, a member of the powerful House Finance Committee, said the tax cut will benefit the state’s future and the finances of Ohio families.

“The $2 billion tax cut is very important to citizens. It was a great budget as far as tax cuts go. The budget’s tax moves also eliminate all state income taxes for people making $25,000 and less a year,” Plummer said. “We wanted a fair tax cut. We also eliminated a tax bracket. We’re trying to help out the people making less money. So they have to pay any taxes if they make up to $25,000 a year, we’re helping out people doing the right thing and still struggling to make ends meet.”

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Lawmakers also approved a school funding plan that is designed to depend less on local property taxes and fund schools in a way that more accurately reflects the true cost of education in a community. Plummer also supported that part of the budget in hopes that districts would not have to go back to the ballot for levies so often in the future.

“I can’t see a single school district losing money on this program. They’re happy. And it’s very transparent so they know what they’re dealing with in the future,” Plummer said.

For decades Bill Phillis headed up the legal challenges of the state’s school funding system and won multiple court cases in which the system was declared unconstitutional by the Ohio Supreme Court. Phillis said Wednesday he’s thrilled to have a new school funding system approved by lawmakers, but it will require continued vigilance. Originally the plan would have funded schools at the new levels for six years. The plan in the state budget funds schools for two years instead, leaving Phillis to say that educators will need to push the General Assembly in the future to stick with the plan rather than abandon it and keep the money flowing through the new pipeline.

“If they don’t open the spigot of this pipeline then we’re back to square one,” Phillis said.

Miami Valley school districts are taking a close look at the new school funding formula, awaiting more details from the State Department of Education. A written statement released by Springfield City Schools Treasurer and CFO Nicole Cottrell said: “HB110 is certainly a rewrite of school funding as we know it.  The simulations provided make it difficult to pinpoint how FY22 will be calculated.  It is equally as difficult to reconcile the amount reported as FY21 revenue as it has been adjusted for HB110 rules.  We are working on a deeper understanding of what effect this will have on District funding and are seeking clarification from ODE before we can answer any questions with specificity.”