Good afternoon Chairman Gibbs and members of the House Ways and Means Committee.  It is my pleasure to be here today to present House Bill 534 on behalf on Representative Collier and myself.

HB 534 seeks to eliminate Ohio’s income tax and alleviate the tax burden placed on individuals who look to make Ohio their home.  This bill phases out the income tax on individuals, estates, and trusts over ten years.  Under the bill, for taxable years beginning in 2010 and thereafter, a taxpayer's tax liability equals the difference of the taxpayer's tax liability using current-law tax rates applicable to taxable years beginning in 2009, minus all credits to which the taxpayer is entitled, multiplied by a percentage.  (The 2009 rates reflect the 21% rate reduction enacted in 2005.)  For taxable years beginning in 2010, the percentage equals 90%.  For each subsequent taxable year, the percentage is reduced by 10%.  For taxable years beginning in 2019 and thereafter, no tax is levied.  Any nonrefundable credit not utilized and authorized to be carried forward to subsequent taxable years is carried forward to its fullest extent against the tax due without regard to the reduction percentage.

A few stats:

• Ohio’s income tax was only instituted in 1971

• Ohio ranked 47^th in 1970 for state and local tax burden as % of income

• Ohio ranked 24^th in 1994 for state and local tax burden as % of income

• Ohio ranked   5^th in 2007 for state and local tax burden as % of income   

According to economist Eric Fisher, “eliminating the income tax will have three important benefits.  First, it will stem Ohio’s relative population loss.  Second, it will increase the long-run rate of economic growth in this state.  Third, it will encourage our best and brightest citizens to work more, benefiting their own families and our state’s economy more widely.”   

So why we are targeting the personal income tax?  The personal income tax is highly punitive on those who generate the wealth and capital in Ohio.  If the tax base is broad, tax rates can be kept as low and non-confiscatory as possible.  Rather than having the high wager earners leave the state, they will stay in Ohio.  As consumers, we should understand this:  he who has the lowest price wins.

Some will dispute the statistics, but the undisputed fact cannot be ignored—we are a high tax state.  High tax states rob citizens of economic prosperity.  And with that comes continued outward migration of wealth and people.  Ohio’s economy and taxes have a direct relationship.  Whether it is state or local taxes, legislators have a duty to act on this issue.  We can and should raise the bar regarding our “less government, less taxes” pledge to voters.   

Eliminating the income tax is the best way to spur our economy and our state’s prosperity.  According to “Rich States, Poor States”, a publication of the American Legislative Exchange Council, “…if history is any guide, states that try to respond to slow revenue growth and budget deficits with tax hikes will not gain tax revenues; they will lose businesses, jobs, and families.  In the last U.S. recession, the states that actually cut taxes to promote economic growth and job creation saw the most rapid return to fiscal and economic health.  States cannot tax their way to prosperity or to a balanced budget for that matter.”  In addition, ALEC points out that oppressive tax structures actually hurt those who they aim to help—the poor.

High taxes lower the growth of income, wealth, employment, capital investment, and in-migration.  It is time to save Ohio from its downward spiral.

Chairman Gibbs, this concludes my sponsor testimony.  Thank you for your time.  I will be happy to answer any questions.