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How will Ohio's new tax adjustments affect you?



Published: Sat, August 31, 2013 @ 12:01 a.m.

SEE ALSO: Ohio sales tax increases, income tax decreases

By JAMISON COCKLIN

jcocklin@vindy.com

YOUNGSTOWN

Shoppers in the Mahoning Valley and across Ohio can expect to pay a bit more at the cash register starting Sunday, but they’ll also notice a slight increase in their paychecks next month, too.

As part of the $62 billion, two-year state operating budget approved by Ohio lawmakers and signed into law by Gov. John Kasich in July, the sales tax rate will increase by one-quarter percent from 5.5 percent to 5.75 percent, or 25 cents for every $100 spent on vehicles, electronics, clothing and other retail goods.

The increase is part of a larger package of tax adjustments that will reduce overall business and individual taxes by an estimated $2.7 billion over the next three years. A decrease in the state’s income tax rates means that employers will withhold less taxes from workers’ paychecks starting Sunday.

Employers will withhold 8.5 percent less this year, 9 percent less next year and 10 percent less in 2015.

The cuts are retroactive, which means Ohio taxpayers will be credited on their 2013 state income tax returns for what they overpaid in the first eight months of this year.

According to data from the Ohio Department of Taxation, a family of three with an average annual income of $75,698 will save $105 a year in taxes, while the 0.25 percent sales tax increase would cost an additional $37 per year.

The same data show that an individual with an average income of $38,235 would save $49 in taxes and pay an additional $23 a year in sales tax.

The department of taxation estimates that 35 percent of an average Ohio family’s spending is subject to the sales tax. Groceries, housing, medicines, education and many other purchases are exempt from sales taxes. Even with the latest change — Ohio’s first increase since 2003 — the state’s rate is still lower than about half the U.S. states.

Because the decrease in income taxes is expected to be offset by the sales tax increase, the changes will not stimulate Ohio’s economy or the revenue state government takes in, said Cleveland-based economist George Zeller.

Policy Matters Ohio, a liberal think tank in Cleveland, has estimated that the income tax cuts would result in the top 1 percent of Ohio wage earners on average receiving $6,000 a year while the bottom fifth of wage earners would have to pay $12 a year.

“It’s considered a regressive tax because those with a higher income spend less of their earnings on sales tax, whereas those with a low income spend most of their earnings buying things just to survive,” Zeller said.

For the most part, though, many agree that the sales tax increase will have a marginal impact.

Gordon Gough, executive vice president of the Ohio Council of Retail Merchants, said any time workers have more in their paychecks they’re bound to spend just a little more. This is good for retailers, but he said consumers will “swipe their credit cards and sign the dotted line.” In other words, they won’t notice the increase in prices.

For example, under the new sales tax, a consumer who pays $10 for a meal after Sunday will pay an additional 2 cents in tax. A consumer that purchases a vehicle for $20,000, meanwhile, will pay an additional $50 in sales tax, according to the department of taxation.

Steve Chos, executive vice president of the Automobile Dealers Association of Eastern Ohio, said dealerships in the Mahoning Valley did not seem to be concerned about the increase in sales tax.

He said some of them were interested in advertising before the increase went into effect, but they were not at all worried about a drop in sales.

Carol McFall, chief deputy auditor in Mahoning County, said counties across the state will not benefit in any way from the increase in sales tax. It’s a state tax, and counties will not get any of it.

County governments must impose their own sales tax increases or place them on the ballot, she said.

The Associated Press contributed to this story


Comments

1bmanresident(577 comments)posted 7 months, 2 weeks ago

I love the Republican leadership that has fallen upon Ohio. Of course the socialist pro union folks will surely have something negative to say but this is the real progress that Ohio needs!

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2LtMacGowan(622 comments)posted 7 months, 2 weeks ago

Yeah its so wonderful that when I got out of the Army I was badly hurt and the offer they made me was ridiculous they refused to acknowledge I was hurt on the job so to speak. So I sued them. During this time I couldn't accept my VA coverage without accepting their offer.

I go to the Welfare office to ask for Medicaid to help me see a doctor to get healthcare. I was told that No one unless they are under 19, over 62, or disabled (I have no kids) can get Medicaid, I said how the heck can I become judged disabled if I cant afford to see a doctor, let alone several MRIs, specialists, Neurologists, etc.

I didn't even qualify for other assistance.

I had to up and move to Pennsylvania. The very first time I walked in the office there I walked out with Temporary Medicaid. A state I had never lived in during my entire life welcomed me and treated me like a person.

My suit was settled 5 1/2 months later.

I will NEVER forgive Kasich's republican government for this.

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3LtMacGowan(622 comments)posted 7 months, 2 weeks ago

btw I just want to add because I'm sure there will be comments about how people supposedly live high off the hog on welfare. I received maximum benefits for a single male with no kids. This consisted of $86 every 2 weeks cash assistance. $150 of Foodstamps a month, and Medicaid. Do you even understand how ridiculous that is? $86 every 2 weeks... $43 a week $6.14 a day to live.

This is why we need to raise taxes. The amount of money we provide is ridiculous. These children whose mother are on welfare they have done nothing wrong but be born and will be crushed by poverty that is all pervasive.

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4CompManRetired(28 comments)posted 7 months, 2 weeks ago

Along with these changes new and replacement levies no longer qualify for the 12.5% property tax rollback. Schools, safety services, roads etc. will cost more than the stated amount of money per $100,000 home. (Renewals not changed). Starve the Beast and force levy entities to lobby for a reversal and only approve renewals. Be prepared for new school income tax levies of which there are 2 types; traditional (all AGI income) and earned income (excludes SS, pension, IRA etc. income) based. Also, the Homestead Exemption reduction changes now to means tested to those newly minted 65 years old property owners at $30,000 yearly earnings or lower. (Grandfathered those already 65).

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5southsidedave(4709 comments)posted 7 months, 2 weeks ago

More money from the pockets of the citizens to the pockets of the State is never good the average citizen, particularly the poor

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6gdog4766(1254 comments)posted 7 months, 2 weeks ago

Yeah, great progress! This is exactly the type of tax reform I would expect from a rescumlican. A tax cut that only really benefits the upper class and a tax increase that the middle and lower middle class will feel more. A guy making 100k a year love the tax cut but a guy making 20k a year feels the sales tax increase a lot more. Just more scummy anti working man crap from you dirtbags.

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