During the biennium budget process in 2015 Ohio House and Senate leaders crafted a study commission to look deeper into tax items outside of the budget process. The reason was that the budget is a hurried process with a definitive time frame and getting in-depth into forward looking tax policy issues was often too time consuming for the budget process. Since its creation, the 2020 Tax Policy Study Commission (“Study Commission”) has been meeting on several topics and last week issued a report to the General Assembly on the feasibility of moving Ohio from a progressive personal income tax to a flat rate personal income tax. 

The report is largely made up of testimony presented to the Study Commission during ten public hearings over a years’ time. Forty three individuals testified, including government officials, business leaders and academic professionals. The co-chairs of the Study Commission, Sen. Bob Peterson and Rep. Tim Schaffer, indicate in the report that the testimonies summarized “both successes and flaws in Ohio’s taxation policies, and they highlighted potential solutions and posited theories about Ohio’s economic future”.

The actual recommendations from the Study Commission itself are very short and refer back to the testimony that was heard. Specifically, the Study Commission has indicated that it is clear that while moving to a flat tax would be potentially beneficial, “a transition to a flat tax is challenging with the amount of tax credits and expenditures” that Ohio currently offers. The 120 exemptions that are currently offered results in a loss of $7 billion to Ohio’s revenue.

As we previously reported, the General Assembly, in an effort to look at tax expenditures and credits had also created the Tax Expenditure Review Committee (“Committee”). The Committee is comprised of legislators from both chambers and the Tax Commissioner. While the Committee became effective in March, they have yet to hold their first hearing, however legislative leaders have indicated that the Committee will begin to meet in the very near future.

In conclusion, the Study Commission has essentially handed off further analysis of a flat tax to the Tax Expenditure Review Committee. And in doing so the Committee can review and potentially identify expenditures that could be eliminated or modified to free up revenue needed to begin to make the change to a flat rate income tax.

Have a question? Contact Thomas Zaino. Your comments are always welcome!