![]() ![]() ![]() Third, a low, flat income tax rate will save Ohioans money, allowing more workers to keep more of their own earnings. Some of the fastest growing states like Texas, Florida, and Tennessee have already eliminated their income taxes entirely and made themselves more attractive to entrepreneurs, workers, and retirees living off invested dollars that have already been taxed. We estimate that moving to a flat tax will create thousands of new jobs and increase Ohio’s GDP by $5 billion by the next budget cycle.Īs many states have rightly recognized, investment drives economic growth. When the flat tax was abandoned in favor of a progressive tax structure, hours worked also decreased, but less than when the flat tax was introduced, and significantly less than predicted by the model.Economic research shows that income taxes reduce investment returns, trailing only corporate taxes as the second most harmful form of taxation. ![]() However, the findings show that when Slovakia replaced its progressive tax with a flat one, the actual hours worked decreased, contrary to predictions. Theoretically, the incentive to work increases when a progressive tax structure is replaced with a flat tax, while the incentive to work decreases in the opposite case. In Slovakia, there was a transition from a progressive to a flat tax system in 2004, followed by a reversion back to a progressive tax system in 2013. Using national accounts data and the Prescott’s (2004) labor market model, Slovakian work hours were examined at points in time around the adoption of a flat tax system in 2004 and a progressive tax system in 2013. To measure the impact of taxes on the incentive to work under both scenarios, we relate hours worked with the effective marginal tax rates. Of particular interest are the changes from progressive-to-flat and flat-to-progressive tax conditions. This study examines the impact of taxes on the incentive to work under flat and progressive tax systems. ![]()
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