(C) Ohio Capital Journal
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Analysis: Tax credit reform would benefit Ohio families [1]
['Susan Tebben', 'More From Author', '- November']
Date: 2023-11-27
New research by an Ohio think tank found that a bill sitting in the Ohio legislature could benefit more than a million children in the state.
House Bill 290, combined with reforms in the federal refundable tax credit system, could bring financial relief to low and moderate-income families, according to Policy Matters Ohio researchers Bailey Williams, Will Petrik, Chloe Gonzalez and Zach Schiller.
“Recent cuts to the state income tax did little for everyday Ohioans and actually increased tax burdens for several others,” the report stated. “It does not have to be this way.”
The research found that HB 290, also called the Thriving Families Tax Credit, could bring eligible households an average tax cut of $1,006, households that could include more than 1.4 million Ohio children.
“Families making $65,000 per year or less would qualify for the full benefit, with the benefits tapering off up to a cap of $85,000 per year.
The bill was referred to the Ohio House Ways and Means Committee at the beginning of October, but hasn’t received any hearings yet.
Democrats who introduced the bill in October called it a “priority investment … right up there with funding our public schools.”
A reform to the federal Earned Income Tax Credit, giving it a refundable option, could contribute even more to families.
The EITC is specifically for low and middle-income households, meant to “offset federal payroll and income taxes, raise living standards and boost the incomes of low-wage workers,” researchers stated, and the complementary federal child tax credit is “designed to help families offset the cost of raising children,” much like the proposed state tax credit in HB 290.
The Policy Matters report proposed an EITC that gave the option of a 10% refundable credit or the current 30% nonrefundable credit, changes that “could be funded by boosting taxes on the wealthy and big corporations,” according to the report.
“The reformed EITC would provide tax cuts benefitting roughly 1.9 million Ohioans, including 700,000 children,” researchers stated.
The child tax credit was increased during the COVID-19 pandemic, and child care advocates and elected officials alike praised the tax credit for its helpfulness to families.
“The success of the expanded federal CTC in reducing child poverty and family economic insecurity can be attributed to its status as a fully refundable tax credit,” the Policy Matters analysis stated.
The increases in the CTC were allowed to expire, something that advocates and Policy Matters researchers said had a negative impact on children in the state.
In order to cover the new proposed tax cuts, the analysis mentioned elimination of the business income deduction, reinstating corporate income tax and raising income tax rates on high-income Ohioans.
“The introduction of either of these revenue raising mechanisms would cover the cost of providing tax relief to those in our state who would need it the most, also reversing some of the tax shift to lower and middle-income Ohioans that has occurred in this century,” the report stated.
The tax reforms could also push against trends in racial inequality, which also leads to increased mortality rates in minority groups versus white communities.
Policy Matters found that Black and Hispanic families are “overrepresented in the bottom 20% of earners,” despite only making up 13.1% and 3.5% of the state population respectively.
Tax credits without income requirements and with refundability clauses “guarantees the most economically vulnerable families will benefit from this tax cut,” according to researchers.
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https://ohiocapitaljournal.com/2023/11/27/analysis-tax-credit-reform-would-benefit-ohio-families/
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