CLEVELAND, Ohio – Gov. John Kasich’s plan to reduce Ohio’s income tax by raising other taxes likely would boost the overall tax bill for many smokers while providing the biggest savings for higher-income people.
Plus, some low income people who don’t smoke could get a tax break.
Cleveland.com found those trends after creating a calculator to gauge the impact of key provisions of the proposal Kasich introduced last week.
Use the calculator to estimate what your tax bill could look like if state lawmakers approve Kasich’s plan to change income, tobacco and sales taxes, including a new sales on cable bills.
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A tax cut for you?
Find out how you could be impacted by a series of Ohio tax changes proposed by Gov. John Kasich.
Enter your:
Personal income:
Business income:
Family size: 1 2 3 4 5 6 7 8 9
Two working spouses? No Yes
Cigarette packs weekly:
Monthly cable bill:
Total bill for these taxes
Current Proposed Change $ $ $ These taxes as a percent of income
Current Proposed % % Income tax
Current Proposed Change $ $ $ Ohio sales tax
Current Proposed Change $ $ $ New sales tax on cable TV
Current: None Proposed: $ Ohio cigarette tax
Current Proposed Change $ $ $ Note: The income tax estimates are basic calculations, without special deductions.
— Rich Exner, cleveland.com
Among the changes:
Some of the biggest winners could be lower-income families, who no longer would have any state income tax bill.
Currently, a family of four with income up to $19,000 is exempt from state income taxes. The income threshold for a family of four would change to $27,000 under the governor’s proposal, freeing an additional 300,000 Ohio households from state income taxes.
But the lowest income people – those who don’t now pay income taxes – would pay more overall because of the increase in the sales tax.
The governor’s tax plan is designed to raise essentially the same amount of money by increasing other taxes, and by adding a fracking tax.
For individuals under this plan, the surest way to keep taxes down is to not smoke. A 65-cent per pack increase in the cigarette tax could amount to hundreds of dollars a year.
Here’s how four scenarios would play out, assuming a basic tax form (See details lower in the story about the governor’s proposal and what went into these calculations by cleveland.com.):
* A single person making $35,000 would save $116 a year in income and sales taxes combined. But that savings would be reduced if the person has cable TV and could be wiped out if the person is a smoker. Beginning to tax cable TV would cost $53 a year (based on a monthly cable bill of $70), and the cigarette tax hike would cost a pack-a-day smoker another $237 a year. Add it all up, and this person would pay $174 a year more in taxes.
* A family of four making $65,000 would save $114 a year in income and sales taxes combined. But again that savings could we wiped out by the new tax on cable TV ($53) and the increase in the cigarette tax ($237 for one pack-a-day smoker). Overall, this family’s overall tax bill could be $176 a year higher.
* A family of four making $125,000 would save $218 a year in income and sales taxes combined. But if this family has a $70 monthly cable bill (resulting in $53 in taxes) and consumes a pack of cigarettes per day ($237 in increased taxes), this family’s overall tax bill would be $71 higher.
* A couple making $250,000 a year would save $561 a year in income and sales taxes combined, enough cushion to offset the other tax increases. After $53 in cable taxes and $237 in increased cigarette taxes, this couple would still save $271 under these changes.
Here’s how the taxes would change if the governor’s plan is approved by the state legislature.
Income taxes
The governor is proposing to reduce income taxes 17 percent, cutting rates for each tax bracket. His proposal also increases from $10,000 to $15,000 the taxable income threshold – after subtracting for personal exemptions – below which Ohioans have no income tax liability.
This could free 300,000 additional households from the state income tax, raising the total to 1.5 million – just over one-fourth of all tax filers.
The cleveland.com calculator uses a basic tax form, without most special deductions. It does, however, include credits for low-income people and for families with two working spouses.
Sales taxes
Kasich is proposing an increase in the state sales tax from 5.75 percent to 6.25 percent. (Counties have additional add-ons to the tax. Cuyahoga County’s current sales tax is 8 percent.)
To estimate the impact of these changes, cleveland.com used IRS estimates for how much Ohioans now pay in sales taxes, depending on family size and income. Lower income people tend to pay a higher share of their income in sales taxes.
Expanded sales tax
The governor wants to expand what is subject to Ohio’s sales tax to raise more money. Newly taxed things would include cable TV, travel services, cosmetic surgery, lobbying, repossession services, interior design and landscape services.
A spokesman for the Ohio Department of Taxation said that among the changes, the cable tax would impact the most households. But this tax is for only cable TV. Satellite TV is already subject to the sales tax. And internet and phone charges often combined on single bills would not be taxed; just the cable portion.
Cigarette tax
The cigarette tax in Ohio would increase from $1.65 per pack to $2.25 per pack. Cuyahoga County has a separate local tax on sales taxes.
Rich Exner, data analysis editor for cleveland.com, writes about numbers on a variety of topics. Follow on Twitter @RichExner.
Our editors found this article on this site using Google and regenerated it for our readers.
