Personal Income Tax
The state personal income tax - an adjusted net income tax on individuals, small businesses, estates, and trusts - was first enacted in 1971 as a state revenue source. When first enacted in 1971, the tax had a rate schedule comprised of six brackets, with a bottom rate of 1.0-percent on income under $5,000 and a top rate of 3.5-percent on income over $40,000. By 2005, this rate schedule had grown to encompass nine brackets, with a bottom rate of 0.712-percent on income under $5,000 and a top rate of 7.5-percent on income over $200,000.

The Ohio tax reform plan calls for a reduction and restructuring of the state’s personal income tax. The main feature of the tax reform plan is a 21 percent reduction in the Ohio income tax rate schedule. This reduction, phased-in over five years at 4.2 percent per year, will result in a new top rate of 5.95 percent, which is a 21 percent reduction from the current top rate of 7.5-percent. In addition, the tax reform plan calls for the re-establishment of an accumulated trust income tax, the development of a new higher education grant program and the implementation of a new low-income tax exemption program.

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