Ohio’s ‘flat’ income tax is now in effect. Who benefits?

By Nick Keller/Kent State NewsLab

In summer 2025, the Ohio House of Representatives passed a bill that reduced the personal income tax rate for some Ohioans from 3.5% to 2.75% for the 2026 and 2027 tax years. The change took effect Jan. 1, 2026. 

The flat tax removes Ohio’s top bracket. Previously, Ohio’s tax system had three brackets. Under these three brackets, Ohioans paid no taxes on any income under $26,050 and then paid around $300 plus 2.75% on income above that $26,050. Income over $100,000 was taxed at 3.25%.

Ohio has become the fifteenth state to implement a “flat tax.” 

Under a progressive tax system, as your income increases, higher portions are taxed at higher rates. Under the flat tax, all income above $26,050 will be taxed at the same rate.

But according to Aditi Srivastava, a tax researcher at Policy Matters Ohio, the old bracket system ensured that Ohioans with higher incomes were taxed at higher rates and could contribute more. She believes the flat tax makes Ohio’s general tax system more regressive. 

“What you’re going to be seeing in this year, 2026, is that millionaires in Ohio will be paying the same 2.75% income tax rate as public school teachers, childcare workers, firefighters, or any Ohioans with income over $26,050,” said Srivastava. 

Based on an analysis by the Institute on Taxation and Economic Policy (ITEP), Ohioans earning six figures are overwhelmingly seeing the most benefit from the bill. 

ITEP state analyst Miles Trinidad says their analysis found that the top 20% of households, earning about $138,000 per year, receive about 96% of the tax cut.

Meanwhile, if you look at the top 1%, those with an average income of $1.8 million received nearly 40% of the total tax cut. 

“The biggest thing lost here for folks who aren’t in the top are these public services that create robust communities to help them thrive,” Trinidad said.

Trinidad says the change will cost Ohio around  $1.1 billion in lost revenue. That’s money that could be spent on childcare and other infrastructure. 

“This is a tax cut only really affecting people making over $100,000,” said Srivastava. “And it’s going to be bringing in less revenue, and at the moment, there’s not enough funding for Ohio schools. There’s not even enough funding for public libraries.”

The bill’s sponsors, Rep. Brian Lampton (R-Beavercreek) and Rep. Adam Mathews (R-Lebanon), did not respond to a request to comment. 

Rea Hederman, Executive Director of the Economic Research Center and Vice President of Policy at the Buckeye Institute, says the change will promote economic growth.

“There are several economic studies that show that the private sector spends money more wisely than the government,” Hederman said. “So we expect Ohio to grow more long-term with a flat-tax system as compared to more spending.”

Hederman says that Ohio is required to balance its budget. Following this tax cut, the government will need to moderate spending as well. 

According to Nicole Fox, a policy analyst at the Tax Foundation, there have been attempts to address the revenue loss. Ohio has eliminated a variety of sales tax exemptions, for instance. But those savings fall far short of the $1.1 billion in lost revenue.

For supporters, the flat tax is a necessary leap to make, allowing Ohio to become more competitive and “business-friendly” by rewarding its highest earners and limiting the state government expenditure. 

But for those who oppose it, the flat tax is a regressive prioritization of the wealthy that relies on public infrastructure costs. 

“A flat tax is an aggressive choice, and it’s exactly that; a choice,” Trinidad said. “And it’s the wrong choice for Ohio.”