State trims income tax withholding rates

Written on Nov 30, 2018

Ohioans might notice a bit more money in their paychecks beginning Jan. 1. The Ohio Department of Taxation announced Nov. 30 that the state will reduce withholding rates used by employers to calculate required payroll deductions for the state income tax.

The reductions are the first change in state withholding rates since 2015. They come because of a 6.3% state income tax cut in House Bill 64 approved in 2015 that was not structured at the time to reduce withholding rates to match cuts in the tax rate.

The move comes via executive order by Gov. John Kasich. Earlier this year, Kasich said that with state revenues showing stable growth and the rainy-day fund holding robust reserves, he wanted to bring the income tax and withholding rates into alignment with the 2015 tax cut.

The lower withholding rates, for one example, mean an Ohio taxpayer with taxable wages of $60,000 a year and three dependents will take home about $4.67 more each month. Reductions in withholding rates will not have a long-run impact on state tax revenues. However, reductions in withholding rates in 2019, which will not be offset by lower refunds to taxpayers until 2020, will have a one-time fiscal impact, reducing revenues in 2019 by about $153 million.

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