Ohio is the eighth-least tax friendly state in the country, according to a new ranking by the business forecaster Kiplinger.
Unlike most of the other low-performing states, Ohio did not score overwhelmingly bad in any of the three main tax categories: state and local income tax, property tax and sales tax. Rather, Ohio’s taxes were above average in all three categories, causing Ohio to perform poorly in the overall ranking.
“Property taxes hurt the most, since Ohio had the 14th highest state-wide average property tax rates in the country,” Rocky Mengle, Tax Editor at Kiplinger, told The Center Square via email. “Local income taxes are an issue as well. If we considered only the state-level income tax, then Ohio probably wouldn't be one of the 10 worst states for taxpayers. However, when we add in local income taxes, that pushes the estimated overall tax liability up by a few thousand dollars – which is enough to move the needle in terms of our rankings.”
The report found that Ohio’s state income tax is not exceptionally high: about 2 percent on income over $10,650 and about 5 percent on taxable income over $213,350. However, Ohio allows towns and cities to impose their own income taxes, which are as high as 3 percent in some localities. Combined, this puts Ohio above the mean.
Although housing costs in Ohio are below average, the property taxes are above average. For every $100,000 of assessed home value, an owner would pay about $1,641 every year in taxes.
The state levies a 5.75 percent sales tax, and localities can levy their own sales taxes on top of that, which can be as high as 2.25 percent. The average sales tax in Ohio is about 7.15 percent when state and local taxes are combined.
The Buckeye Institute, a free-market think tank based in Ohio, has suggested that this ranking shows that Ohio needs tax reform. Rea Hederman Jr., the executive director of the Economic Research Center and vice president of policy, in a news release, suggested several reforms.
“If Ohio eliminates its commercial activities tax and simplifies its state and municipal tax laws, we will see more businesses move into the state, more job growth, and the size of Ohioans' paychecks increase,” Hederman said. “And Ohio will finally be above average in a way we can all agree is good for the Buckeye state."
Ohio performed well in some areas. The state has a lower than average tax on beer at $0.18 per gallon and a lower than average tax on cellphone wireless services at 8.55 percent. There is also no inheritance or estate tax.