Proposed legislation in Ohio could give the state one of the lowest income tax rates in the country, which could generate more revenue and political clout at the national level.
Senate Bill 3 would lower the state’s nonbusiness income tax to a flat rate over two years. The Senate Ways and Means Committee gave the bill its first hearing on Wednesday afternoon.
For the 2025 tax year, the top bracket — applying to Ohio taxable income of more than $102,400 — would decrease to 3.125% from 3.5%. The bottom bracket stays at 2.75% for anyone with $26,700 to $102,400 in Ohio taxable income.
The rate would lower to 2.75% for taxpayers with more than $27,350 in taxable income starting with the 2026 tax year.
The bill does not modify the law mandating the tax commissioner to adjust the annual income tax brackets for inflation. It also does not alter the business income flat tax, which would stay at 3%.
In sponsor testimony, Ohio Sen. Stephen Huffman, R-Tipp City, said the measure “will make Ohio an important economic model for the Midwest and provide many new opportunities for Ohio families and businesses to succeed and thrive.”
“In addition to providing much-needed relief to taxpayers, a flat tax system will expand our economy by encouraging out-of-state families and businesses to move to our great state,” Huffman added. “Ohio is surrounded by states that have previously implemented a flat tax – Kentucky (4.00%), Indiana (3.05%), Illinois (4.95%), and Michigan (4.25%). But, our proposal of 2.75% would be the lowest in the region.”
Ohio Sen. George Lang, R-West Chester, said “that by enacting a flat tax, we will encourage economic growth, thereby increasing revenues” and noted that the Buckeye State has other flat taxes, including the state sales tax (5.75%), the gas tax (38.5 cents per gallon) and the commercial activity tax (0.26% on gross receipts of more than $6 million).
“In 1971, the Ohio General Assembly implemented, for the first time, a state income tax,” Lang said. “In that year, Ohio had twenty-six electoral votes. Today? We sit at just seventeen and have lost congressional representation in every census since.
“...If Ohio hopes to increase its congressional representation now and into the future, we need a way to level the playing field,” Lang added. “Senate Bill 3 aims to create a fair, tax-friendly competition, especially with those neighboring our State.”
The proposal has drawn support from local and national groups.
“Implementing a flat income tax is a leap in the right direction,” Americans for Prosperity-Ohio State Director Donovan O’Neil said in a statement.
“Senate Bill 3 would provide relief for hard-working families and generate economic growth by allowing small business owners to choose whether to keep more of what they make or put it back into their businesses - spurring the potential to create tens of thousands of new jobs,” O’Neil added. “We … are eager to continue our work with lawmakers to promote common-sense tax reform.”
In a statement, Americans for Tax Reform President Grover Norquist similarly said the measure would benefit the state’s economic standing.
“States with low, or no income tax are booming and high-tax states are busting,” Norquist said in a statement. “We applaud Republicans for being part of this revolution and moving to a lower, flat income tax rate that will let Ohioans keep more of their hard-earned dollars, promote economic growth, and make it more difficult to raise taxes.
“This outstanding bill from Senators Lang and Huffman would give Ohio one of the lowest flat tax rates in the nation, behind only Arizona, and lower than neighboring Indiana,” Norquist added. “Ohio has been a tax cut leader for 20 years. This bill continues that leadership and has our strong support.”
