Ohio’s Income Tax Reductions to Be Accelerated

From Columbus Business First:

State to accelerate income tax cuts
July 5, 2006 4:53 PM EDT

Rather than transferring money from an expected budget surplus to the state’s Rainy Day Fund, Ohio is returning money to residents by speeding up income tax cuts.

Beginning Oct. 1, the Ohio Department of Taxation will cut personal income tax rates by 8.4 percent, double the annual amount called for in the tax reform package instituted last July.

The cut would be in addition to a 4.2 percent cut in tax rates in January. Ohio’s tax reform package called for a 21 percent income tax cut phased in over five years.

According to a release from Ohio Gov. Bob Taft, the 8.4 percent cut would average about $390 per Ohioan.

Contrary to the impression created in the first sentence, I believe the law mandates the income tax reduction, and that putting the money in the Rainy Day Fund is not an option. Tell me if I’m wrong.

What the larger-than-expected income tax cut proves is that taxes should have been lower across-the-board during all of the past fiscal year. The improved economy in Ohio should also give new momentum to the idea of “killing the CAT” (the Commercial Activities Tax) before more opportunities like Honda’s new plant are lost.