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Tax Tip of the Week | No. 420 | Where Ohio Ranks for Taxes August 16, 2017

Posted by bradstreetblogger in : General, Taxes, Uncategorized , trackback

Tax Tip of the Week | Aug 16, 2017 | No. 420 | Where Ohio Ranks for Taxes

The following is a summary of a report recently issued by the Buckeye Institute:

About a dime out of every dollar Ohioans earn, on average, is taken by local and state taxes.

How does that compare to other states? 

The Buckeye Institute in Columbus and the Tax Foundation in Washington, D.C., partnered to produce a report that attempts to answer that question and provides other interesting facts and tidbits.

The Tax Foundation is a think tank that does research and analysis of tax policies. The foundation describes itself as independent, but often advocates conservative policies.

The Buckeye Institute is a conservative-leaning think tank that advocates for “free-market public policy in the states.”

But what’s good from one political viewpoint might be bad from another.

For example, the Buckeye Institute said in releasing the report that “Ohio’s growing tax burden has resulted in slower economic growth for the state over the past several decades.”

Combined taxes; Ohio ranks 19th highest

Adding up state and local taxes, Ohio ranks 19th highest in the country. Ohioans pay nearly a dime in taxes out of every $1 earned.

Ohio’s rate of 9.8 percent for state and local taxes on average is close to the rates in the neighboring states – Michigan (9.4 percent), Indiana (9.5 percent), Kentucky (9.5 percent), West Virginia (9.8 percent) and Pennsylvania (10.2 percent).

Credit given for city income taxes paid where people work

Most Ohio cities and villages don’t impose their income taxes on residents who pay equal or more income taxes to the city where they work, instead granting the residents a 100 percent “credit.”

For example, the city of Centerville has a 2.25 percent income tax, but collects nothing from residents who work in Oakwood and pay Oakwood’s 2.5 percent income tax.

But some cities in the area such as Xenia and Springboro, give only partial credit. So, workers end up paying income taxes to the communities where they work and taxes to the communities where they live.

Ohio’s sales tax is nearly double original rate

Ohio’s sales tax was established in 1935 and went unchanged at 3 percent for 32 years, then increased to 4 percent in 1967. The rate most recently increased in 2013, to 5.75 percent.

Each county also tacks on additional sales taxes. Once the county and state taxes are combined, rates range from 6.75 percent from Greene and Warren counties, to 7.25 percent from Montgomery County, to a high of 8 percent in Cuyahoga County.

Ohio and U.S. local and state revenue sources

The sources of Ohio and local tax revenue is similar to the national trends. The biggest chunk is from sales taxes. In Ohio, 36 percent of the money is raised through sales taxes. That compares to a national average of 35 percent.

Ohio collects a little more through income taxes than most places – 27 percent versus the U.S. average of 23 percent. And Ohio collects a little less from property taxes – 29 percent versus 31 percent nationally.

Average property tax rates by county

The study rated Ohio ninth highest in the country with property taxes amounting to 1.57 percent of the home values on average. The highest property tax rates are in the state’s two largest counties – 2.13 percent in Cuyahoga County and 2.04 percent in Franklin County.

Sales taxes by state

Combining state and county sales taxes, the average rate in Ohio is 7.14 percent.

The 7.14 percent average rate ranks Ohio near the middle nationally, 19th among the 50 states and the District of Columbia.

Two of the states that impose no state income taxes have some of the highest sales tax rates – Washington at 8.92 percent and Texas at 8.19 percent.

A handful of states have no sales tax – Alaska, Delaware, New Hampshire, Montana and Oregon.

State, local tax collections in Ohio above national average

State and local tax collections per capita in Ohio have been above the national average since the mid-1980s, though the gap has closed in recent years.

Ohio and local governments collected $1,138 per capita in 2014, up from an inflation-adjusted total of $210 in 1974.

Ranking Ohio’s business taxes

The Tax Foundation and the Buckeye Institute created a ranking for various types of taxes on businesses and concluded that Ohio ranks low for unemployment insurance taxes (fourth lowest) and property taxes (11th), but high for individual income taxes (47th) and corporate taxes (45th).

Note: included for corporate taxes was Ohio’s commercial activities tax.

Other findings

The Tax Foundation and the Buckeye Institute included in its report a profile of Ohio on a variety of other topics. Some highlights are below.

Ohio is a cheap place to live, according to the report. In comparison to other states, $100 in Ohio is really worth $112. Just six states were identified as better bargains – Alabama, Arkansas, Kentucky, Mississippi, South Dakota and West Virginia.

On the flip side, $100 is only worth $86.43 of spending power in New York State.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504. Or visit our website.

Rick Prewitt – the guy behind TTW

…until next week.

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