By John Hilber / Broadcast version by Farah Siddiqi reporting for the Kent State NewsLab-Ohio News Connection Collaboration.

Republicans in the Ohio House of Representatives have introduced legislation that would phase out the state income tax and do away with the commercial activity tax, which is Ohio's main tax on businesses.

House Bill 386 and Senate Bill 327 were introduced in January. Both bills would continually decrease the income tax rate for Ohioans, aiming to eliminate it by 2030.

Bill co-sponsor Sen. Steve Huffman, R-Tipp City, said this is the second time he has introduced a bill to eliminate Ohio's income tax. The Senate bill is co-sponsored by George Lang (R-West Chester).

The House bill is co-sponsored by Reps. Adam Matthews, R-Lebanon, and Brain Lampton, R-Beavercreek.

"We need to have a leaner government, and the money is better spent by the taxpayers," Huffman said. "Also to be competitive with other states. If a business is going to locate in Ohio, they know their employees are going to get 3-4% less in pay to pay the income tax that they wouldn't have to pay in other states."

Opponents of the bill say the elimination of income tax would cause the state to lose funding for other services that are important to Ohio.

"If you were to eliminate the income tax, if nothing else was done, you would be cutting annual support to local governments, and the public libraries - each of them - by almost $200 million per year," said Zach Schiller, a research director at Policy Matters Ohio. "You would be reducing support for public safety, or everything that cities, villages and townships spend money on."

"This is a wildly irresponsible thing to do," Schiller added.

Eliminating the income and the commercial activity tax would cause a $13 billion deficit, according to the Ohio Capital Journal. The figure is about 15% of Ohio's 2024 fiscal year overall revenue.

"If there's no replacement of revenue with property tax and sales tax, the state will have to cut spending, and the biggest categories of spending for the state are education and Medicaid," said David Brasington, a professor in the department of economics at the University of Cincinnati. "If the revenue is replaced by sales and property tax hikes, that wouldn't necessarily be the case."

Huffman believes the state of Ohio would not see budget shortfalls during the process of phasing out income tax, in part because the state has a large rainy day fund.

"I also think that there would certainly be a better business environment," Huffman said. "To be able to bring businesses to Ohio because we have less of a tax structure, but also as retailers - people will have more money to circulate through the economy to buy goods and services."

But Schiller said Ohio has cut income taxes in the past, and it hasn't yielded the results that Huffman hopes for.

"We've reduced, especially, the rates that upper-income Ohioans pay, we've created a business income deduction for business owners, and where has this gotten us?" Schiller said. "Our median household income still trails the national average; our job growth has trailed the national average. Ohio's economy has not, in fact, met national averages despite almost 20 years of income tax cuts."

The current state income tax ranges from 2.75 to 3.75%, with households making less than $26,050 having a 0% tax rate.

The median Ohio household earns $66,990 per year, according to the U.S. Census Bureau. Under the current tax code, that household would pay up to $1,842.23 in Ohio income taxes.

Opponents of the bill fear that a further income tax cut would result in the wealthiest Ohioans paying less in taxes.

"Anytime you cut income taxes, it is going to disproportionately benefit the higher income people, because they're the only ones that pay an income tax," Brasington said.

In addition to the income tax being cut, the bill would also eliminate the commercial activity tax (CAT) for businesses in Ohio, which is a tax on what businesses sell. The CAT applies only to companies that have over $150,000 in sales. Only about 10% of Ohio businesses pay the CAT.

"Small businesses do not pay the tax," Schiller said. "If we eliminate it, we're basically saying the biggest companies in Ohio don't need to pay business tax."

Brasington pointed out that if Ohio were to eliminate the income tax, Ohio would be the only state in the region to be without it, which could make the state more attractive for businesses.

He also said that more wealthy individuals are sensitive to tax changes, meaning that if Ohio eliminates income tax, it could influence more wealthy people to move to Ohio - which could in turn aid in the creation or expansion of businesses.

"What people want is the level of services and types of services they like, but they want it done without waste at the lowest possible tax rate that you can get," Brasington said. "So if you just cut taxes, then it will favor certain people and certain businesses, and they will be drawn [to Ohio]. But certain people and businesses may be pushed away if those cuts and taxes are also accompanied by a decrease in services."

If the legislation passes, Ohio would become the tenth state in the U.S. to eliminate the state income tax.

"I think that it will make it that much less likely that we'll have a state with well educated, healthy residents with a full range of opportunities," Schiller said. "We'll have a much more unbalanced tax system that is both unable to meet the needs of Ohioans and shifts much of the cost to low- and middle-income people. It will be much harder for Ohioans to live the happy, productive lives that we all would like."

The House and Senate versions of the bill are currently before each chamber's Ways and Means Committee.


This collaboration is produced in association with Media in the Public Interest and funded in part by the George Gund Foundation.


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Connecticut groups want Gov. Ned Lamont to use some of the state's budget reserve to fund social programs.

The state has amassed a more than $4 billion budget reserve in recent years.

But the governor is holding onto the money, saying the extra funds will be needed to bail the state out of any future economic trouble.

Norma Martinez-HoSang - director of the nonprofit Connecticut For All - said she understands that, but said the money could make a real difference.

"In Connecticut, we saw many families suffer from being underinsured or not insured at all," said Martinez-HoSang. "There've been a lot of people not able to afford their rent and even evictions. Our schools have been using ARPA funds since the pandemic - and now, those are ending at the end of the year."

Polls show using these funds to help shore up basic safety-net programs is widely popular with Connecticut voters.

Sixty-three percent say they want the budget reserves to be used for education, health and human services, and other priorities.

Only 8% want all surplus funding to be spent on paying down state employee pension debt. A 2024 report finds overall statewide pension debt is close to $37 billion.

Along with the budget reserve, Martinez-HoSang noted that policymakers could take other steps to make Connecticut life more affordable. One suggestion is to fix the state's 'regressive' tax system.

Studies show low and middle-income earners pay a higher percentage of their income in taxes than wealthier residents.

Martinez-HoSang said the state's fiscal guardrails are "out of touch" with people's needs.

"We should find a way to work around them in 2025 - and get rid of them in a few years when they're up again, to be reestablished or to get rid of them," said Martinez-HoSang. "So, those fiscal guardrails are in the way of real investments that our community needs."

Other legislation to handle this issue should come up when the General Assembly reconvenes next year.

Martinez-HoSang said this should involve addressing the state's volatility cap.

This creates a limit on the amount of revenue used to balance the budget. While it's supposed to capture those funds, it has diverted more than a million dollars in recent years, which can be spent elsewhere.




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Income inequality in Wisconsin continues its long path upward, according to a new academic analysis, and voices at the community level are hopeful about closing gaps - but warn it won't happen overnight.

The University of Wisconsin-Madison summary says income inequality in the Badger State isn't quite as high as the national level, but has been growing steadily over the past 30 years.

The author said higher-income individuals benefit disproportionately from the economic growth.

Robert Kraig, executive director of Citizen Action of Wisconsin, said years of policy decisions and tax code changes are driving factors.

"We need a deliberate policy that restores the conditions for greater economic equality and greater racial equality," said Kraig, "because our socioeconomic system is color-coded, where you are more likely to be poor if you're Black or Brown than if you are white."

Kraig said there are no longer guaranteed pathways for people to secure good-paying jobs, whether they pursue college or look for work after graduating high school.

He said he thinks jobs tied to clean energy growth, spurred by federal investments, can help reverse years of troubling trends.

But he said other important sectors, like childcare, need structural changes to foster stronger wage growth.

Kraig suggested that if someone working a low-wage job can't take time off to attend a training course, they stand little chance of advancing in a new career.

So, he said another reform that's needed is an overhaul of job training programs.

"A lot of the workforce training programs we have are helpful to a number of people," said Kraig, "but they don't move the inequality numbers because they don't reach enough people."

The Inflation Reduction Act has set aside billions to train and place people in clean energy jobs. But Kraig said other programs need to pay people to train and start working in a new career much sooner.

New York legislation can address growing anti-trust concerns. The 21st Century Anti-Trust Act updates the state's aged anti-trust laws and closes loopholes companies have abused. This comes as an Institute for Local Self-Reliance report finds corporations in New York and nationwide leverage structural racism and use other tactics to establish market dominance.

Susan Holmberg, associate director for research with the Institute for Local Self-Reliance, said one such tactic is stripping communities of local businesses and basic services.

"So, a lot of monopolies, they're just trying to edge out smaller competitors, but by doing that they're wiping out independent businesses that are much more well suited to serve communities of color, often because they live in these communities and their incentives are so different," she explained.

Other patterns Holmberg identifies are imposing high prices and substandard services on areas with no alternatives and exploiting workers of color. Some oppose the bill, saying it's anti-business and anti-consumer, while others say it favors competitors over competition. But Holmberg noted these trends aren't limited to companies such as Amazon. They're economy-wide trends also in the banking, waste, pharmaceutical and grocery industries.

Federal bills can also aid national antitrust practices. The Competition and Antitrust Law Enforcement Reform Act gives federal enforcers the necessary resources to do their jobs and strengthens prohibitions on anticompetitive conduct and mergers. Other federal antitrust work is building a foundation to rein in monopolies, Holmberg said.

"They're really reorienting and returning antitrust to its original intent, how the laws were written which is about dispersing economic power, promoting fair competition and enhancing community self-determination," she added.

She said this is also about safeguarding financial liberties for people in the United States. But, some of the biggest hurdles to this are limited resources for agencies such as the Federal Trade Commission and political challenges like a divided Congress.