Ohio Republicans want to implement a flat income tax of 2.75% to compete with surrounding states and entice residents to stay in the state.
State Reps. Adam Mathews, R-Lebanon, and Brian Lampton, R-Beavercreek, introduced House Bill 30, which would phase down the 2.75% flat tax over the next two years. The 2.75% rate would be roughly .25% to 1.5% lower than neighboring states.
The lawmakers presented the plan to the Ohio House Ways and Means Committee on Wednesday, but it faced opposition from policy advocates and Democratic colleagues.
Under the bill, the top income bracket—making more than $102,400—would see its non—business income tax rate reduced from 3.5% to 3.125% in 2025, with the bottom income bracket at 2.75%. In 2026, the top tax bracket would drop to 2.75%, matching that of the lower brackets.
Ohio’s state tax brackets depend on taxable income and residency status. The state has three tax rates: 0%, 2.75%, and 3.5%, which apply to income earned in 2024. The tax system is progressive, which means that income can be taxed at multiple rates, depending on how much you make, according to tax.ohio.gov.
The change builds upon the work of previous General Assemblies “to simplify and reduce the tax burden on Ohioans and ensure our state remains a destination for businesses to grow and attract people wishing to work, raise a family and truly thrive here,” Lampton told the committee.
According to the bill's Legislative Service Commission breakdown, the business income tax would remain at 3%.
In comparison, neighboring Pennsylvania has a flat 3.07% income tax and a 7.99% corporate income tax rate. Indiana residents pay a flat 3.05% individual income tax and a 4.9% corporate income tax rate.
According to taxfoundation.org, Kentucky has a flat 4% income tax rate and a 5% corporate income tax rate. Similarly, Michigan has a flat 4.25% individual income tax rate and a 6% corporate income tax rate.
As laid out in HB 30, the rate adjustments would “put Ohio in a position to lead the Midwest with a lower tax than our neighbors, thereby making us an economic model for the region,” Mathews said.
Ohio Capital-Journal reports that policy advocates and Democratic legislators oppose the plan. They argue that the move wouldn’t relieve property tax struggles and would force cuts to government services due to lost revenue.
“The one thing we are constantly hearing about is ‘do something about property taxes,’” said state Rep. Daniel Troy, D-Willowick. “This change of dropping the tax rate some more, it basically takes away the revenue that’s needed for property tax relief.”
Republicans on the committee seemed supportive of the bill. State Rep. Steve Demetriou, R-Bainbridge Twp., offered a different outlook on the tax changes.
“When we’re talking about taxes, this money doesn’t belong to anyone else except the taxpayer,” Demetriou said. “It doesn’t belong to the state, it doesn’t belong to the libraries, it doesn’t belong to the schools. It’s their money, so we’re just helping get more of that back into their pockets.”
H.B. 30 will have more House Ways and Means Committee hearings, including opportunities for testimony for and against the measure.
