Tax collections in Ohio are lagging for four of the last five months – but why?

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COLUMBUS, Ohio (Ohio Statehouse News Bureau) – In four of the last five months, Ohio has come up short of budget estimates in tax collections. Republican lawmakers touted $3.1 billion in tax cuts in the budget that took effect last July, largely through the consolidation of four tax brackets into two.

An image of a cloudy sky above a state agency
[Karen Kasler / Statehouse News Bureau]
But legislative leaders, who pushed for income tax cuts and have praised the state’s financial position, say they’re concerned but not sounding warning bells yet.

April’s tax collections were off by 8.4% – down about $224 million. And since December, tax collections have been off around $700 million, down every month except February:

  • April: down $224.3 million, or 8.4%
  • March: down $171.3 million, or 9.6%
  • February: up $38.4 million, or 1.8%
  • January: down $70.5 million, or 2.7%
  • December: down $263.7 million, or 11.5%

Those receipts include the personal income tax, the commercial activity tax, sales taxes, cigarette and alcohol taxes, and the tax on liquor, among others.
Senate President Matt Huffman (R-Lima), a longtime promoter of tax cuts, is watching.

“It’s a significant issue. The question at the moment is why? And some of it has to do with refunds and some of it has to do with is the economy slowing down,” Huffman said. “I think that we probably need to take a couple of months and see how the trends will continue.”

Huffman notes the taxes on cigarettes, alcohol and liquor have been down the last two months, but taxes on car sales are up for April.

Year to date, tax collections are down $446.7 million, or 1.9% from estimates.

At the start of the budget process last year, the state had $6 billion in surplus cash in the general revenue fund, boosted by unspent federal COVID relief money. Both Huffman and House Speaker Jason Stephens (R-Kitts Hill) have talked up the state’s financial position. Stephens praised the “good budget” just before it passed last June, and Huffman said in an interview about the sustainability of universal school vouchers that “the state has plenty of money.”

Stephens said these last few months show the challenge of forecasting for a two-year budget cycle.

“You know, that’s the hard thing about the budgeting the state. It’s a two-year budget. So you’re trying to—two and a half years out— you’re trying to anticipate what revenues will be. And sometimes you get it closer, you have a good month or a bad month, but hopefully it evens out,” Stephens said.

Another thing to watch is the state’s main business tax, the commercial activity tax. The budget passed and signed last year ends the CAT for 90% of Ohio businesses starting in May.