by Bruce Checefsky

     (Plain Press May 2024) Ben Stein, communications director at Policy Matters Ohio, held a webinar to celebrate Tax Day and discuss the tax code in Ohio. As recently as April 2023, over 2.9 million Ohioans struggled to pay basic household expenses while burdened with taxes.

     According to Policy Matter Ohio, the regressive tax structure disadvantages black and brown people in Ohio due to the labor market and educational siloing. In Ohio, lower-income households pay the largest share of their income in total state and local taxes. They pay a disproportionate share of sales and excise taxes. The bottom 60% pay more taxes than before 2005, while the top 1% pay an average of nearly $51,000 less.

     State legislators, if they choose, could revise the state tax code for all Ohioans and not just the wealthy, said Stein during his introduction.

     “The whole point of collecting taxes is to fund the big collaborative projects that benefit everyone,” he said.

     Stein quoted Bailey Williams, a researcher focusing on tax policy and tax investments, by adding, “We recognize the importance of public education by funding schools; public safety by funding our firefighters; and vibrant communities by funding parks, libraries, and protections for our water, air, and soil.” 

     Republican lawmakers have been busy taking away parental and transgender rights and announcing plans to end the state personal income tax and the commercial activity tax. One proposal would replace the current tax bracket structure with a flat tax rate. Another proposal would eliminate the state income tax.        

     House Bill 1, which the Speaker of the Ohio House, sponsored by Representative Adam Mathews (R-Lebanon), aims to flatten the income tax rate, something both House and Senate Republicans are hoping to accomplish in this general assembly. Ohio currently has four tax brackets ranging from 2.765% to 3.99%. H.B. 1 eliminates these tiers, instead setting a flat 2.75% rate for all Ohioans. House Republicans and Republicans in the Senate are supporting the bill; Democrats are not convinced. The legislature must seriously consider the consequences of lowering the income tax rate for everyone.

     As of 2023, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not levy a state income tax.

     On the webinar were: Policy Matters Research Director Zach Schiller; Matthew Tippit from the Children’s Defense Fund; Patrick Russell, a Zanesville father of three; Larry Bresler from Northeast Ohioans for Budget Legislation Equality (NOBLE); and Bailey Williams.

     Schiller described a mechanism that could limit the share of household income spent on property taxes for owners and renters. “A property tax circuit breaker works like an electrical circuit breaker,” he said. “Beyond a certain limit set by the state, the circuit breaker kicks in, and the state covers the tax that remains, so schools, libraries, and other public services don’t lose vital revenue.”

     Schiller also noted that lower-income Ohioans pay as much as four times their income in property tax as the top 1%. Working with a model of local and state taxes showed that a 5% circuit breaker would benefit about one in six Ohio taxpayers.

     “It is very important to note that this is not some wild, eccentric, radical new policy. Twenty-nine states, including the District of Columbia, have some form of circuit breaker,” he said, “including Michigan, Pennsylvania, and West Virginia. This is the most targeted form of property tax relief going to the people that need it.”

     Tippit described the need for a fully refundable child tax credit. More than 20% of children live in poverty in Ohio, with one in seven children facing food insecurity. The child poverty rate in Cleveland is 45.9%, the ninth highest in the state and the highest for any city in the United States with a population over 300,000 people. For people in poverty of all ages, Cleveland is second in the country behind Detroit at 31.5%.

     The Thriving Families Tax Credit “allows families the flexibility to spend it on what their children need,” Tippit said.

     State Representatives Casey Weinstein and Lauren McNally introduced the Thriving Families Tax Credit, or House Bill 290, last year to help support nearly two million children in Ohio. If passed, families with children under age five will receive a benefit of up to $1,000 per child and up to $500 per child for those between 6 and 17 years of age. Families earning less than $65,000 would qualify for the entire benefit amount. Benefits are less for those who make between $65,000-85,000 a year.

     The legislation has stalled since its introduction. The possibility of passing the bill is uncertain, given the Republican supermajority’s reluctance to take it up.

     “Some people might use the tax credit to make sure children have school clothes for the year,” said Tippit. “Families can choose how to spend the extra income based on their needs.”

     Childcare costs about $11,000 a year, or 40% of a single parent’s income. The costs are unsustainable for some people.

     “We live in a state where we are ranked 29th in child well-being. Families are surviving and not thriving,” he added.

     Patrick Russell, 32, a Zanesville father of three, shared how he and his wife Nikki, 32, handle health challenges, education debt, and barriers to work by making do with less and how refundable tax credits would help them afford the basics and stay afloat. Their children range in age from 10 to six to two years old.

     With school loans over $70,000 for their education and extra loans to cover basic expenses, the couple amassed a mound of debt over $190,000. The COVID-19 pandemic further eroded their ability to make ends meet, with Nikki on leave from work and Patrick unable to work due to health reasons. The COVID-era expansion of the federal Child Tax Credit helped pay for their living expenses.

     “It helped pay for food; it helped pay for everything,” Russell said. “It did make a difference.”

     Credit card debt racked up for gas, groceries, clothes, and school fees. They asked local charities for help during the Christmas holidays and relied on food banks for basic food needs, which they continue to do.

     “My wife would feed the kids first, then take a smaller portion for herself, which we continue to do to this day,” said Russell. “I eat only one meal a day to save money.”

     Bresler explained refundable tax credits like the federal Earned Income Tax Credit (EITC). Low to moderate-income workers with qualifying children may be eligible to claim the tax credit if they have worked and earned income under $63,398, have investment income below $11,000 in the tax year 2023, have a valid Social Security number, and are a U.S. citizen or a resident alien. The Earned Income Tax Credit (EITC) is a work credit that may give you money back at tax time or lower the federal taxes you owe.

     “If the credit exceeds the amount of taxes owed, the taxpayer can receive the remaining balance as a refund.” Bresler noted that Ohio’s EITC is not refundable, saying, “If we had a refundable tax credit in Ohio, an estimated 1,750,000 people, including 670,000 children, would benefit.”

     Williams described a sales tax credit that would be more targeted than the recently expanded sales tax holiday, a measure that, he noted, is “panned by both liberal and conservative groups as overly broad. It doesn’t do enough for those who need it,” Williams said. A targeted sales tax would “offset the regressive nature of the sales tax by targeting relief to those who need it.”