Ohio is ready to reap the economic benefits of a tax reform strategy 15 years in the making – the state is just one of a handful to announce rate reductions as its economy recovers from the coronavirus pandemic.
Ohio’s Lt. Gov. Jon Husted told FOX Business that state leadership is hoping to attract new business investment and residents after it recently detailed the latest iteration of a series of ongoing tax reform measures.
"Fifteen years ago we began reforming our tax plan – we eliminated the corporate franchise tax … eliminated the death tax — we went from a high-tax state to a lower- tax state," Husted said. "We absolutely do see it as a time to compete. Capital will ultimately go where it can be the most appreciated."
Ohio Gov. Mike DeWine signed a state budget for 2022-2023 that includes 3% tax cuts worth an estimated $1.6 billion. About 125,000 people will have no state income tax liability at all as the threshold for the bottom income bracket increases. The top tax bracket was also eliminated, so wealthier residents will pay a lower rate.
Ohio has moved from nine brackets to four over the course of about 6 years.
In response to criticism that the cuts favor the wealthy, Husted said everybody in the state will receive tax relief.
"Of course if you have been paying more in taxes and you get an across the board cut, you are going to receive a greater dollar benefit – but everyone will benefit," he explained.
The budget will make a $1 billion investment in the state in order to accelerate economic growth.
Ohio is one of nine states that have cut personal income taxes during the pandemic, while five have cut corporate tax rates.
But the Buckeye State is also introducing a number of measures to make it a desirable destination for businesses and business owners.
The state, for example, will allow investors in Ohio-based businesses and venture funds to deduct certain capital gains tax liabilities.
The strategy to make Ohio an attractive destination for businesses has already begun to produce results, Husted said. Companies like Amgen, Peloton and First Solar have all made recent announcements about expanding investments in Ohio.
The state was able to cut rates because it has a budget surplus, which Husted attributes to a variety of decisions made during the pandemic, including not completely shutting down some sectors of the state economy – like manufacturing and construction.
When asked about concerns that the Biden administration could implement tax increases and eliminate provisions – like stepped-up basis – that are crucial for small business owners, Husted said he cannot change what is going on at the federal level but sees it as an opportunity for Ohio.
The state’s lieutenant governor predicted that "capital is going to flee" to lower tax destinations.