News Release
December 31, 2007 - A New Year, a
New Set of (Lower) Tax Rates in Ohio
COLUMBUS, Ohio - New Year’s Day will bring
with it another series of cuts in state tax rates – the
latest step in an ongoing reform of Ohio’s tax system.
The most obvious change for most taxpayers will be lower
withholding rates, which take effect for pay periods ending
on or after Jan. 1, 2008.
The lower withholding rates will increase the take home pay
of Ohioans by approximately $350 million during 2008. They
represent a 4.2 percent decrease from 2007, and are another
step in the phase in of a 21-percent, across-the-board income
tax cut that will be complete by 2009.
Overall, 2008 withholding rates will be 16.8 percent lower
than they were in 2004 – in line with income tax rates that
will also be 16.8 percent lower for the 2008 taxable year
(and 2009 filing season). Next year, a family of four earning
$60,000 will save about $350 when compared with 2004 tax
rates.
“Ohio’s new withholding rates mean that taxpayers will be
keeping a little more of what they earn in their take home
pay this year,” Tax Commissioner Richard A. Levin said.
The new income tax rates are part of a package of tax reforms
enacted by the Ohio General Assembly in 2005 and embraced by
Governor Ted Strickland in his 2008-09 budget proposal.
The reforms also include major changes for business taxes in
2008. Notably, 2008 will be the last year most business
owners face a tax on tangible personal property such as
machinery, equipment, furniture, fixtures and inventory. In
2008, personal property will be assessed for tax purposes at
6.25 percent of true value, down from 12.5 percent in 2007.
In 2009, personal property assessment rates will fall to zero
for most businesses – making Ohio one of just 10 states
without a general business tax on tangible personal property.
The tangible personal property of business has been taxed
since 1846 in Ohio. But it is disliked by business owners,
who have come to see it as a disincentive to investment.
During the past 40 years, several major studies of Ohio’s tax
system have criticized the tax for hurting the state’s
ability to compete for jobs, particularly in the
manufacturing sector.
“The hope is that eliminating this tax will encourage
investment in Ohio,” Levin said.
Other major changes ahead for the 2008 taxable year:
- Payments on the corporation franchise tax, a business
privilege tax on either net worth or net income, will fall to
40 percent of 2005 levels, down from 60 percent in 2007.
- The commercial activity tax (CAT), a new business
privilege tax on gross receipts, will rise from 0.156 percent
to 0.208 percent on April 1. The CAT is being phased in to
partially offset revenue lost from the phase out of the
corporation franchise tax and the elimination of taxes on the
tangible personal property of most businesses.
Another major change for 2008 is designed to benefit military
retirees. House Bill 372, which was signed into law on Dec.
20 by Governor Strickland, will exempt military pensions from
the state income tax starting on Jan. 1.
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For more information, contact John Kohlstrand at (614)
644-3858 or Mike McKinney at (614) 466-5461.