Guillermo Bervejillo: Proposed flat tax is a scam

Published 12:00 am Monday, March 20, 2023

There’s a familiar scam making rounds at the statehouse in Columbus these days: the flat tax. 

Like most scams, it sounds good at first. But once we push past the catchy talking points it turns out that working people of Ohio — from Ironton to Ashtabula — are being swindled: Flat taxes benefit primarily the rich. 

Rep. Stephens, R-Kitts Hill, the speaker of the Ohio House of Representatives, seems to have bought in to the scam. 

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His top priority, House Bill 1, proposes a flat tax that will cost Ohio more than $2 billion a year but it provides less than $3 in tax savings for most Lawrence County residents. 

It’s a bad deal for the people whose work makes our state prosper. We need to make sure Rep. Stephens and our other elected officials focus on serving everyday Ohioans, rather than wealthy donors and corporate lobbyists.

 In Ohio, the wealthier you are, the less state and local taxes you pay as a share of your income.

That’s in part because all the other taxes are already flat: sales taxes, gas taxes, cigarette taxes, etc. 

Think about how much you have spent on those taxes in the past month. I can guarantee you that that amount takes a bigger bite out of your paycheck than it does out of the paychecks of people who can afford hefty donations to politicians. 

That’s why those same wealthy donors want to make the income tax flat too: It is the only state tax that is based on your ability to pay.

Flattening the income tax makes the whole tax system even more skewed to favor the rich. 

Under Stephens’ bill, they will pay even less than they do now—and the rest of us will see little or no difference. 

Families making less than $30,000 per year will get nothing from House Bill 1. Families making $50,000 will see a tax cut of $3 or less. 

Meanwhile, an individual making half a million dollars per year could see a tax cut of more than $5,000: a very significant amount to most people, but not nearly enough to make a difference to wealthy households deciding whether to live in Ohio. 

The Institute on Taxation and Economic Policy — a nonprofit with a sophisticated model of the state and local tax system — found that 89 percent of the value of the tax cut will go to households making more than $124,000 per year, and 35 percent will benefit the few that make more than $617,000. 

Meanwhile, the bottom half of Ohio households will receive nothing or very near nothing. All at the price tag of more than $2 billion; defunding our towns, schools, parks, emergency services, and other critical public infrastructure.

It’s just not worth it. 

Flat taxes are a fiscally irresponsible, inefficient use of our collective resources: they consistently fail to deliver the benefits their proponents promise. 

Ohio has been steadily cutting taxes since 2005 and our economy continues to struggle. Ohio’s share of employment and number of business establishments have steadily declined relative to the rest of the country over the past two decades.

In a typical year, Ohio grows slower than the rest of the country. And when recessions hit, they hit harder and longer than the national average. 

We need to put our collective resources back into Ohio communities, but Stephens’ bill would have us put them in the pockets of the already wealthy. 

 When Ohioans pay taxes, we expect everyone to pay their fair share. The way to do this is to ensure that people contribute according to their capacity to pay.

According to Policy Matters Ohio’s polling, 71 percent of voting Ohioans support raising taxes on those making more than $250,000 per year. 

If we did this, we could dedicate our collective resources to ensuring that every Ohioan can thrive, to innovate, and to live fully right here in Ohio.

Guillermo Bervejillo holds a PhD in economic geography from The Ohio State University. He is a State Policy Fellow with Policy Matters Ohio.