Ohio鈥檚 poorest residents pay a greater percentage of their income to state and local taxes than the richest Ohioans, according to from the nonpartisan Institute on Taxation and Economic Policy.
It found that Ohio has the 15th most unequal tax system in the country.
According to the report, the state鈥檚 poorest 20% of households contribute about 12% of their income to state and local taxes.
The richest 1% of households pay about 6% of theirs.
鈥淲hen you ask people what they think a fair tax code looks like, almost nobody is going to tell you that they feel that the rich should be paying lower rates than everyone else,鈥� said Carl Davis, the institute鈥檚 research director. 鈥淵et in Ohio and around the country, that's what we tend to see.鈥�
Systems like this come at a cost, Davis said. They deepen income inequality and limit the amount states can generate for public services like schools and roads.
Why do the poor pay more?
Ohioans pay all kinds of different state and local taxes, from the income tax to property and sales taxes.
鈥淎 lot of revenue in Ohio is raised by taxing what people buy,鈥� Davis said, 鈥渓ike their clothing or utilities or motor fuel to get to work, or taxing their homes through the property tax.鈥�
Those tax percentages are the same for everyone, regardless of how much they make.
And the expenses add up. They end up costing poor families a higher share of their income than rich families.
So Ohio, like many other states, tries to offset this discrepancy with the income tax. That鈥檚 a progressive tax, meaning the richest households pay the highest rates.
But it鈥檚 not steeply progressive, Davis said.
鈥淪o in the big picture, when you add it all up, your gas tax, your property tax, sales tax and income tax, the overall system tilts regressive,鈥� he said. 鈥淚t ends up asking quite a bit less of high income people than of anyone else.鈥�
Progressive vs. regressive
Davis argues for a more progressive tax system.
鈥淭here's a real purpose and intent to having some progressivity in your income tax,鈥� he said. 鈥淥hio arguably doesn't have enough, and certainly if your goal is to not have regressive taxation overall, which is not something that most of the public wants.鈥�
The high rates for the poorest 20% of households have real consequences, Davis said.
鈥淭hat can really make it hard for families to pay the rent, to keep food on the table, to pay the bills,鈥� he said. 鈥淚t's quite a lot to ask of someone who's in a vulnerable economic situation. And it's really not necessary.鈥�
And, he argues, it has consequences for public services.
鈥淚f you're levying low tax rates on people who have very large amounts of income, you're really restraining the ability of the overall tax system to generate revenue,鈥� he explained. 鈥淪o there's real impacts here for how well Ohio is able to fund schools and parks and infrastructure and all these other services.鈥�
But not everyone is convinced.
In the Ohio legislature, Republican lawmakers have to gradually get rid of the state income tax. They argue eliminating it would draw more people and business to the state, and that since former Gov. John Kasich started eliminating income tax brackets more than a decade ago, the state鈥檚 economy has gotten stronger.
"We've had, actually, an increase of revenue,鈥� said Rep. Adam Mathews (R-Lebanon), in a with 鈥淭he State of Ohio.鈥� 鈥淲hen you have more economic activity coming into the state or staying in the state and growing here, whether that's sales tax or income tax, you have an increase of revenue. And we've seen sales tax continue to increase and keeping at a consistent rate.鈥�
Davis questions this logic.
鈥淎 lot of the narrative around what income tax cutting or income tax elimination would mean for economic growth, I don鈥檛 think that aligns with the reality,鈥� he said. 鈥淚f you look at the actual economic experience of states that have income taxes or that don鈥檛 have those taxes, it鈥檚 a very mixed bag. There鈥檚 no clear evidence that having a lower income tax will lead to faster growth.鈥�
Other states鈥� approaches
If Ohio wanted to even the playing field, Davis said it could borrow ideas from other states.
鈥淭he states that we see with less regressive tax code, states like Minnesota and Vermont, they have things in common,鈥� Davis said. 鈥淭hey often have more robust income taxes than Ohio does.鈥�
More states are also implementing refundable tax credits, like the child tax credit, he said.
In Massachusetts, a voter approved initiative created a higher income tax credit on millionaires. It鈥檚 raising billions of dollars a year for education and infrastructure.
鈥淭here are real policy choices to be made here that do make a huge difference,鈥� Davis said. 鈥淭here are ways to bring down taxes for lower income earners.鈥�
