Ohioans of all walks of life are doing their part during the pandemic. Exhausted health care workers continue to care for our sick friends and family members. Teachers moving from class to distance learning still pay special attention to the students who need it. Although often paid low wages, grocery store clerks risk storing our shelves. COVID-19 proves that everyone is better off when we all pull together.
But today, certain government decision-makers are using tax breaks and tax cuts to direct our public funds to the wealthy few. The pandemic recession is putting pressure on the state budget, which Ohioans rely on to fund the services we all need.
Ohio can do something other states have started: Ohio lawmakers can rewrite the rules to help everyone – regardless of race or location – weather the pandemic recession stronger. After a 10-year advocacy campaign, New Jersey governor Phil Murphy found that the falling revenue caused by the pandemic recession required action. In September he signed a law introducing a tax on the top 1% of the workforce. The proceeds will support public schools, communities, and the state’s depleted rainy day fund.
In May, Ohio Governor Mike DeWine decided to respond to Ohio’s revenue shortage caused by the pandemic by cutting $ 776 million from the 2020 state budget. It doesn’t have to be like that. Our friends at New Jersey Policy Perspective joined Policy Matters Ohio to unveil our plan to clean up and offset state income tax in Ohio.
The plan would reduce the business income withholding or LLC void that pulls $ 1 billion annually from Ohio’s budget. It would reverse years of state income tax cuts and restore the maximum rate set under Republican Governor George Voinovich. The plan would create a new bracket for the top 1% of taxpayers, add credit for low-income families, and generate nearly $ 2 billion.
During the last recession, both states tried only to respond to cuts, and both slowly recovered as their wealthiest residents thrived. Between 2010 and 2018, high-income households in New Jersey had cumulative tax breaks of over $ 7 billion. In Ohio, the richest 1% pay an average of $ 40,000 less a year in state taxes than in 2005. People in the middle pay about the same and people at the bottom pay more. By taxing the richest 1%, New Jersey began to correct course. Ohio is still in the same rut.
State tax codes can expand the options for everyone, regardless of race. When policymakers turn public funds all the way up, they promote racial income and wealth inequality. In Ohio, the median income of black households in 2018 was $ 33,590, just under half the typical white household. Thus, more white families can take on unexpected emergencies like a pandemic, while black families are at higher risk of being laid off and losing their homes.
With the pandemic recession hurting the most skin-colored and low-income people, New Jersey lawmakers realized that they could no longer avoid reforming the state’s outdated and unfair tax laws.
All people – wealthy or not – want great public schools and reliable infrastructure. New Jersey has continued to attract millionaires since the 1990s, despite policy makers raising state income tax rates twice for affluent households.
New Jersey’s conservative legislature and governor struggled for years to rebalance tax laws. Ohio can also reverse course and fund a better future for all. The COVID crisis proves that we are all really together. Let our state tax laws reflect this.
Caitlin Johnson is the director of communications for Policy Matters Ohio.