Unpacking Vivek Ramaswamy’s plan to eliminate Ohio’s income tax

In 1964, Americans faced a stark choice: elect fiscal conservative and small-government-minded Barry Goldwater or reelect President Lyndon B. Johnson, the man who pledged to end poverty through federal intervention.

Ohio State University Associate Professor Benjamin McKean said Ohioans face a similar choice this year between pharmaceutical entrepreneur Vivek Ramaswamy and former state health department director Amy Acton in the race for governor.

Every year, McKean shows his political science students a speech delivered by future president Ronald Reagan on Goldwater’s behalf called “A Time for Choosing.” 

In it, Reagan implores Americans to vote for an economic future where the markets – rather than the U.S. government – rules the economy.

There are echoes of Reagan’s speech in Ramaswamy’s campaign promise to eliminate Ohio’s income tax if he is elected governor. But that promise comes along with a $9.8 billion dollar budget gap to fund public education, health care, and public safety services across the state, according to a February report released by Innovation Ohio. 

Gov. Mike DeWine warned that Ramaswamy should not cut the income tax further. The Cincinnati businessman did not respond to a request for comment, but previously told reporters that eliminating the tax will only benefit Ohioans and draw more business to the state.

“It’s striking to look at the kind of folksy, populist, anti-government rhetoric from 1964,” McKean said. “A politician today could deliver that speech. It’s certainly been a long time that these ideas have been fermenting on the right.”

Innovation Ohio, a Columbus-based nonprofit organization, warns that unless the state brings in “historically unprecedented revenue and population growth, replacing approximately $10 billion in annual revenue would require significant reductions in spending or increased reliance on … working Ohioans.”

Michael McGovern, president of Innovation Ohio, said the organization compared Ramaswamy’s plan to eliminate Ohio’s income tax with a similar proposal enacted in Kansas.

Legislators there said that cutting the income tax would drive population growth and jobs, but by 2017 had reversed course.

“It was an absolute disaster in Kansas,” McGovern said. “They saw their bond rating lowered, they saw massive cuts, they saw an increase in other taxes on working people. And at the end of the day, it went so poorly that Republicans actually repealed that and put the income tax back in place.”

State Sen. George Lang said Ramaswamy’s vision is going to be a “tremendous benefit” to everyday Ohioans.

The West Chester Republican — co-chair of the legislature’s business caucus — cited Florida, Texas, Tennessee, Utah and Indiana as examples of other states that have cut taxes to attract businesses. “If we can become that state with the most business-friendly regulatory and taxing environment, we will financially dominate the other states in two to four decades,” Lang said. “And Bob and Betty Buckeye will flourish as a result.”

McGovern argued this Ohio-tailored version of trickle down economics is not an academic thought experiment but rather a real policy that Kansan legislators tried and failed to achieve over a decade ago. “For somebody who claims to be a smart businessman, this just really proves that [Ramaswamy’s] not,” McGovern said. “Because there’s no way that you could make these sort of dramatic tax changes without really screwing over normal folks.”

If Ramaswamy is elected and his income tax plan becomes policy, Melissa Cropper is terrified of its impact on Ohio’s public schools.

Since 2005, the longtime educator and current union president of the Ohio Federation of Teachers has watched as the state has cut back on the percentage of income tax it charges residents each year. 

“That has cost the state $17 billion annually,” she said. “We can’t afford to lose any more tax revenue. I mean, I know that people – none of us – particularly love paying taxes, but we love the services that we get from those taxes.”

Innovation Ohio’s report estimates that property taxes would have to increase by 20 percent — or an additional $3 billion — to make up for the loss of income tax revenue that funds statewide spending on school administration, food service and transportation. Yet Ramaswamy has also proposed rolling back property taxes to pre-pandemic levels, creating potentially even more massive budget shortfalls.

“Losses of that magnitude cannot be absorbed without real consequences: larger class sizes, reduced support for students with disabilities, fewer bus routes, and diminished access to meals and basic services,” the report states.

Lang, a staunch fiscal conservative, acknowledged that if Ramaswamy’s economic agenda comes to fruition, the statehouse will have to work together to provide additional funding for public education.

“The money we piss away in Ohio that we could be redirecting to education is astronomical,” said Lang, who cited as one example shifting money from state parks, which the Republican legislature recently hit with massive budget cuts. “Finding the money to educate our citizens will not be a problem. The money is there. We just have to reallocate it.” 

Cropper emphasized that Ohioans are about to celebrate the 30th anniversary of the DeRolph decision, a case in which the Ohio Supreme Court declared the legislature’s school funding formula was unconstitutional.

“When it was declared unconstitutional, the state’s share of school funding was 46 percent. They’re currently at 32 percent,” she said. “It angers us because we’re seeing every day how our school districts are having to make very, very tough decisions about laying off staff, about cutting programs … and it’s our students who are suffering through all of this.”

McKean, whose academic research centers the intersection of global supply chains and political freedoms, said there are times when economic policies resembling Ramaswamy’s make sense. This moment in Ohio politics is not one of them, he said.

“I think a lot of people in Ohio find the idea that taxes are too high compelling, because, of course, many people do find it hard to make ends meet but also because they don’t feel like they’re getting their money’s worth,” the professor said.

However, he added, the services Ohioans complain about would improve if they paid more in taxes.

“I think plans like Ramaswamy’s or Reagan’s can become a self-fulfilling prophecy,” McKean said. “You cut taxes, you weaken the government, the quality of services decline, and then people feel like [the] government isn’t helping. … [The] government is useless, and so they become persuaded to cut taxes even more.”