State of the Week: A Look at Ohio and Threats to Competitiveness

By at 31 July, 2016, 11:54 am

Tax Hikes on the November Ballot

Welcome to Ohio 

by Raymond J. Keating-

Ohio’s Small Business Ranking

Small Business Policy Index 2016: Ohio ranked 9th best among the 50 states.

SBE Council’s “Small Business Policy Index 2016” ranks the 50 states according to 50 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2016: Ohio ranked 8th best among the 50 states.

SBE Council’s “Small Business Tax Index 2016” ranks the states according to 25 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

The Latest: Local Income Tax Increases Up for November Votes

Ohio has made great strides in improving its public policy climate for entrepreneurship, investment and small business in recent times.  However, assorted localities are seeking to increase their income taxes this November.

The improvement at the state level has been historic. The state’s corporate income tax, which stood at 8.5 percent in 2005, was eliminated, along with its death tax. For good measure, the state personal income and capital gains tax has been reduced, for example, from a top rate of 7.185 percent in 2005 to 4.997 percent in 2015.

However, Ohio also allows municipalities to impose their own income taxes. Toledo imposed the first municipal income tax in 1946. According to the Ohio Department of Taxation’s “Downloadable Municipal Income Tax Rate Database” (downloaded here), 868 local government entities in Ohio now impose an income tax (applying to both individuals and businesses), with rates ranging from 0.4 percent to 3 percent.

Unfortunately, assorted localities are looking to raise the income tax burdens imposed on local entrepreneurs, families and businesses in proposed measures on the November 8 ballot. For example:

CLEVELAND: The Cleveland city council has voted to put a measure on the ballot that would increase the city’s income tax from 2 percent to 2.5 percent.

DAYTON:  Officials in Dayton voted to put an income tax increase on the ballot – which, if passed, would take the rate of 2.25 percent to 2.5 percent.

NEW FRANKLIN: City officials in New Franklin voted to put a measure on the ballot that would double the city’s income tax from 1 percent to 2 percent, coupled with some property tax relief.

CENTREVILLE: The Centerville city council voted to put an income tax hike on the ballot, which would increase the rate from 1.75 percent to 2.25 percent.

If passed, these tax increases would hurt residents, businesses and job seekers by draining resources away from the private sector, and making the various Ohio localities costlier and less competitive in terms of living in the area, and in terms of starting up, owning and operating a business.

Other Key Points on Ohio…

Ohio has no state-level corporate income tax.

Ohio has no state death tax.

Ohio has no state alternative minimum tax.

Ohio is not a right-to-work state.

Ohio imposes a minimum wage mandate that is higher than the federal mandate.

Ohio has poor safeguards against eminent domain abuses.

Ohio ranks 32nd among the states in terms of electricity costs, according to an SBE Council analysis.

Much has been accomplished at the state level in making Ohio more competitive, tax increases at the local level work in the opposite direction.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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