2011 income tax cut marks final step in historic tax
COLUMBUS, Ohio – Ohio’s individual income
tax rates will fall by more than 4 percent across the board
next year, meaning additional savings for Ohio taxpayers.
But there is a larger historical significance to next year’s
rate reductions. They also mark the finish line in
one of the most ambitious packages of state tax cuts ever
undertaken in Ohio, a multiyear plan that has
reduced income tax rates four other times and phased out
Ohio’s two largest business taxes.
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 plan, launched during the Taft administration, was
embraced by Governor Ted Strickland and has 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.
Overall, the 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. Overall, the reforms are thought to be Ohio’s single
largest package of tax cuts in at least 70 years.
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
“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
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 “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.
Also, Abercrombie & Fitch recently informed
shareholders that it would save $180,000 each year in
state taxes if it reincorporated in Ohio instead of Delaware.
“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 – that
speaks volumes about just how competitive Ohio has
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, with the
support of major business organizations, opted to postpone it
for two years in order to close a budget hole created by an
unexpected Ohio Supreme Court decision concerning the
placement of video lottery terminals at horse racing tracks.
The savings associated with next year’s income tax cut will
vary according to the income of the taxpayer. But, for a
family of four earning $60,000, it means $77 less tax per
year. Such a family was already paying about $309 less income
tax per year because of four previous rate reductions.
Ohio taxpayers will realize the savings from next year’s rate
reductions when they file the 2011 income tax returns due in
April, 2012. At that point, the 2011 rate change will mean
either a larger refund or a smaller amount due. No change is
planned in the amount of money that Ohio employers withhold
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Media with further questions may contact John
Kohlstrand at (614) 644-3858. The department has prepared a
fact sheet on the tax reform plan, available at:
A timeline of other key moments in Ohio tax history is
A history of Ohio income tax rates is available at: