Rational Taxation

Taxation is a necessary component of government. It is both a primary source of revenue to provide for the government services and investment we all rely upon and a tool for managing and correcting the market. It has other uses as well, many policymakers and voters like to imagine it as a weapon of punishment or righteousness; but we’ll stick to necessary revenue and market efficiency. 

Taxes are not ideological. Turning taxation into a partisan issue with one party being assiduously anti-tax (with no plan for balancing budgets aside from cutting government functions to nothing) and one party being pro-tax though usually limiting its ambitions to only the high earners and corporations (which simply do not offer a large enough tax base to cover even the more modest of their grand designs) is a recipe for a disastrous system of taxation. 

It is the position of this campaign that any system of taxation should be broad based, consistent in its application, and simple in its design. It should prize efficiency and balancing revenue with expenditures. The most efficient, least distorting taxes should be used first and only new taxes applied when reasonable  After these considerations have been met, it can also be used in a limited capacity for a more equitable and socially desirable flow of capital. It must be done sparingly so as not to complicate the tax code and to prevent special interests from securing themselves improper or undesirable benefits. 

Below are the simple proposals for the reform of Ohio’s tax system to better meet the conditions for an optimal tax system outlined above. 

Income Tax: Five Brackets

Ohio will move to a five-bracket graduated income tax, replacing the current flat-ish structure. Proposed brackets:

• Up to $30,000: 0%
• $30,001–$50,000: 2.5%
• $50,001–$100,000: 3%
• $100,001–$250,000: 3.5%
• Above $250,000: 4.5%

Inheritance Tax

Ohio will impose a tax on inheritances between $750,000 and $1.5 million of 2%; 5% on amounts above $1.5 million.

• First $750,000 inherited: 0%
• $750,000–$1.5 million: 2%
• Above $1.5 million: 5%

This is a tax on inheritances, not estates. The tax is assessed after receipt, not before. 

An Inheritance Tax is a highly efficient and fair tax as inherited wealth is inherently unearned wealth. A tax on inheritance does not discourage productivity. 

But these rates are also modest to avoid discouraging saving and preserves incentives to build wealth. 

Severance Tax

Ohio will raise the severance tax to 4% of the market value at the point of extraction on oil and natural gas. This remains well below other producing states but is a significant increase for Ohio. 

These are resources being extracted from Ohio and are the natural inheritance of the state. It is efficient and appropriate to tax this extraction and to reinvest it into the state and the people of Ohio. 

Land Value Tax

Ohio will eliminate Property Taxes. Ohio will adopt a Land Value Tax. This transition will happen over the course of 4 years. 

A Land Value Tax is one of the most efficient taxes possible. Land exists in fixed amounts. 

Much of land value comes from:

• Public infrastructure
• Schools
• Roads
• Local businesses
• Community growth

These are not created by the landowner alone but by the community. 

Taxing land value rewards communities for the value that they help to create and encourages further investment in public goods and being a desirable place to live. 

Property Taxes: 

• Discourage building housing
• Punish upgrades and renovations
• Favor vacant lots and dilapidated houses

Land Value Taxes:

• Encourage new construction
• Discourages speculation
• Punishes absentee landlords 
• Taxes vacant lots and unproductive land more
• Reduce housing shortages
• Encourage redevelopment

Many of the services property taxes currently fund will be more directly funded by the state under our plan, requiring significantly less tax collected by localities and more tax collected by the state. As such some of the Land Value Tax will go to the state. 

The statewide Land Value Tax will be set at 2.5%. Localities are permitted to tax land value up to an additional 3.5% with a maximum LVT rate of 6%. 

This will be a reduction from Property Taxes for many homeowners and shift more of the tax burden onto owners of vacant lots, owners of dilapidated or abandoned property, and owners of undeveloped and underdeveloped land in desirable cities. 

Sales Tax

We will institute a modest increase of the statewide sales tax rate by .25%.

Commercial Activities Tax

We will eliminate the Commercial Activities Tax (CAT). It is a highly inefficient tax that worsens Ohio’s competitiveness and discourages new business growth in the state.