Ohio’s 2011 income tax rates 21 percent lower than in 2004
Written by Staff Reports | | news@toledofreepress.comOhioans are about to receive the delayed final round of a five-part income tax cut.
The arrival of the new year will bring state tax rates down by 4.2 percent, completing what was supposed to be a five-year, 21 percent reduction begun in 2005. But it will have taken six years finish the tax cut; the last stage was put on hold for one year in a 2009 compromise to help bridge an $850 million state budget gap.
The Ohio Department of Taxation said in a Dec. 30 statement that the latest tax change means a family of four earning $60,000 per year will pay $77 less tax for 2011.
With next year’s rate change, state income tax rates will be a full 21 percent lower across the board in 2011 than they were in 2004, the year before the Ohio General Assembly launched the tax reform plan as part of House Bill 66.
The Department of Taxation release also stated that this plan, launched during the Taft administration, and supported by Governor Ted Strickland reduced taxes throughout his term as governor. The reforms also included a gradual phase out of local property taxes on business machinery and equipment and a phase out of the state’s corporation franchise tax on profits. These taxes, which ended for nearly all taxpayers after 2008 and 2009, respectively, were replaced with the commercial activity tax, which imposes a much smaller burden on businesses and generates far less revenue.
It was reported these reforms mean a net annual savings for Ohio taxpayers of about $2.1 billion each year. Next year’s income tax cut will add an additional $400 million per year to that total. Ohio Tax Commissioner Richard A. Levin said the changes helped improve Ohio’s business climate. In particular, he praised the elimination of taxes on business personal property.
“For decades, experts said these taxes on machinery and equipment discouraged business owners from making investments that create jobs in Ohio. And they were right,” Levin said. “Ohio is now one of just ten states that no longer taxes machinery and equipment. That’s a big competitive advantage — one that I think will grow in importance as business owners learn about what we?ve accomplished during the past five years.”
Others share Levin’s view that the reforms have improved Ohio’s business environment. Last January, Eric Burkland, president of the Ohio Manufacturers Association, told the Columbus Dispatch that Ohio has a “tax structure right now that beats anybody.” Jay Foran, senior vice president of Team NEO, told the Akron Beacon Journal that Ohio’s new tax structure has made the difference in some companies deciding to locate in Ohio.
Abercrombie & Fitch recently informed shareholders that it would save $180,000 each year in state taxes if it reincorporated in Ohio instead of Delaware, according to the Department of Taxation.
“That was a striking announcement, “Levin said of the Abercrombie notice. “Delaware’s reputation is that of a state tax haven. For a corporation to conclude that Ohio’s taxes would impose less of a burden than those of Delaware’s that speaks volumes about just how competitive Ohio has become.”
The 2005 tax reform plan was implemented on schedule except for one piece — Next year’s income tax cut. The cut was originally scheduled for 2009, but state leaders decided to postpone it for two years in order to close a budget hole created by the Ohio Supreme Court decision concerning the placement of video lottery terminals at horse racing tracks.
Taxpayers will realize the savings when they file their 2011 income tax returns due in April 2012.
Tags: Economy, Government, Ohio, taxes
