June 9, 2025 • 7 mins
Dr. Jared Pincin of Cedarville U. says there is a certain way it has to be done to work. He is more in favor of a consumption tax
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I wanted to talk taxes, everybody's favorite topic. You know,
we've got the state lawmakers working on the state budget
needs to be on the governor's desk, Governor Dwine's desk
by the end of the month. One of the things
they're talking about is implementing a flat income tax rate
down to two point seventy five percent, and it would
essentially offer a tax cut for those who are making
(00:21):
over one hundred thousand dollars a year or more. So
our expert, doctor Jared Pinson on the Legacy Retirement Group
dot com phone line, Professor of Economics at Cedarville University,
Doctor Pinson, good morning, Thank you for the time your
thoughts overall generally on how a flat income tax would
work in Ohio.
Speaker 2 (00:40):
First, good morning, and thanks for having me. Sure for
a flat income tax, what it would do for Ohio
is it puts it in line with its neighbors. Each
one of its neighbors other than West Virginia has a
flat income tax, and this proposal rate would be lower
than its neighbors. So would put it in a competitive
position regionally to attract to attract businesses into the state,
(01:03):
to attract capital into the states. So that's the idea
behind it.
Speaker 1 (01:07):
And that's important because if you have the higher tax rates,
you have people who are you know, entrepreneurial minded and
you know, business leaders, and you know, if it's too
expensive for them to do business in the state of Ohio,
they'll take their ball and go somewhere else.
Speaker 2 (01:21):
Right, Yes, and Ohio has a reputation, whether it's fair
or not, to being at least business unfriendly. And you know,
again that we could debate whether that's a fair assumption.
But at the moment, all the states are out it. Again,
except for West Virginia, have flat tax and so there's
been a flat tax revolution at the state level really
for the last ten years or so. You now have
(01:43):
fourteen states that have a flat tax, you have nine
states that don't have an income tax at all, and
then you have the rest of the states that have
these these graduated progressive income taxes. So Ohio's trying to
signal that they are going to be more market oriented
and friendly in this case.
Speaker 3 (02:00):
I don't know that that's a bad thing.
Speaker 1 (02:02):
Critics of this they see, you know, a tax cut
for the wealthy. I don't know if one hundred thousand
dollars a year annually is wealthy or not when that's
a different discussion.
Speaker 3 (02:12):
But let's for this argument say that it is.
Speaker 1 (02:15):
They say that unfairly you know, gives them a tax break,
and you know the folks in Ohio making you know,
between like twenty six grand and one hundred grand don't
get any tax breaks at all.
Speaker 2 (02:26):
Well, that's going to depend on what deductions and exemptions
they end up eliminating as well. And if you if
you lower the tax rate, but you brought in the base,
that is what your tax in the rate is lower,
so you lose the disincentives when you're earning more income,
but at the same time, your your tax revenue could
stay the same, it could increase. A lot of estimates
(02:48):
have it decreasing right now. The question that I would
have is two fold. If if you're going to do
tax relief, it's always going to be on people that
are that are paying the taxes, and no one is
asking for a higher rate for those earning under one
hundred thousand. So if you're don't go to a flat rate,
it's going to be it has to be a tax
cut for those who are earning more or a tax
(03:09):
increase for those who are earning earning less. So that's
the big question. And then the second one is, let's
say it does cost revenue that the billion dollars that
some are estimating would cost, is that a billion dollars
that the state has to spend. There's nothing magical about
the number in the budget of what Ohio is going
to spend. And so those those are questions that you
(03:31):
really have to consider when you look at the proposal
as a whole.
Speaker 1 (03:33):
Yeah, and again not to be at the dead horse here,
but the folks making you know, one hundred.
Speaker 3 (03:38):
Thousand dollars or more.
Speaker 1 (03:40):
You know, these are folks who invest in businesses, in
real estate and stocks and potentially create jobs.
Speaker 3 (03:45):
And it's the whole that trickle down theory, right.
Speaker 2 (03:51):
Triggered down.
Speaker 1 (03:51):
It's such a such a loaded loads, I get it,
but that essentially that's what that's what it is, is
that the people at the top create opportunities for people
willlow them.
Speaker 2 (04:01):
We're not created. You want to create a system where
you're not disincentivizing additional production. And so if we could
start from scratch completely, most economists would want a consumption tax,
because that is taxing what you're taking out of the
economy rather than what you're putting in. We'd remove taxes
on savings and interest, but a flat tax is the
(04:23):
next best thing because we're never starting from a completely
blank slate.
Speaker 3 (04:27):
Okay, so you brought up consumption tax.
Speaker 1 (04:28):
I'm glad you did, speaking by the way with doctor
Jared Pinson, professor of econ at Cedarville University. So amongst
the would you say eight or nine states that have
no income tax at all, including Florida, Tennessee, Nevada, and
a handful of others. How did they offset having no
state income tax?
Speaker 2 (04:47):
Yeah, so the main thing they do is they have
a higher tax on consumptions, a tax on retail. It
could be a sales tax. Some states like Florida can
also tax tour more. That makes a lot of sense.
A lot of people go to to Florida for touruses,
but it's mainly in the sales tax. So yeah, you
have to raise revenue in some way. So if you're
(05:09):
going to remove an income tax, the consumption tax is
going to be higher, or they're just going to simply
have lower spending paired with that. So that's the main
way that they go about it.
Speaker 3 (05:18):
So what would we do in Ohio.
Speaker 1 (05:20):
If we're going to, you know, cut taxes for a
certain segment of people making over one hundred thousand dollars
a year, how do you how do you offset? How
do you bring that money back elsewhere?
Speaker 2 (05:32):
Yeah, the first thing you could do is it can
remove certain exemptions, and that's where the bill right now
is a little vague as to what they are doing.
So the other thing is increasing as we mentioned taxes elsewhere.
One of the proposals is to increase the cannabis tax.
It's a ten percent statewide plus the individual county levies.
(05:52):
The proposals to put it up to twenty percent. I
don't know how much revenue that itself is going to bring,
but that's the direction that you'd want to move to.
Or is looking at at items that are not going
to cause distortions. What we mean by that is if
you tax this, I'm going to avoid that. I'm going
to go over here that which isn't tax And that's
what a flat tax is meant to avoid in general,
(06:16):
is people bouncing around trying to avoid the tax.
Speaker 1 (06:19):
So I think the proposal is to is it to
slowly implement this or is it based on just a
certain fiscal year or calendar year that all of a
sudden it'll kick in.
Speaker 3 (06:31):
How would this be? How would this get underway in
the state of Aile.
Speaker 2 (06:35):
It's a two step process that there would be the
initial the tax going to the flat rate. Excuseually wouldn't
happen all in one step. There'd be an initial tax cut,
and then we would get another tax cut to get
to that flat two point seventy five percent, so that
the initial cut would be this year, and then we'd
get into flat tax into next year. Because steners would
(06:58):
know Ohio is in a biannual buy jet, uh so
it wouldn't. It doesn't have to happen in one step.
I wanted to talk taxes, everybody's favorite topic. You know,
we've got the state lawmakers working on the state budget
needs to be on the governor's desk, Governor Dwine's desk
by the end of the month. One of the things
they're talking about is implementing a flat income tax rate
down to two point seventy five percent, and it would
essentially offer a tax cut for those who are making
(00:21):
over one hundred thousand dollars a year or more. So
our expert, doctor Jared Pinson on the Legacy Retirement Group
dot com phone line, Professor of Economics at Cedarville University,
Doctor Pinson, good morning, Thank you for the time your
thoughts overall generally on how a flat income tax would
work in Ohio.
Speaker 2 (00:40):
First, good morning, and thanks for having me. Sure for
a flat income tax, what it would do for Ohio
is it puts it in line with its neighbors. Each
one of its neighbors other than West Virginia has a
flat income tax, and this proposal rate would be lower
than its neighbors. So would put it in a competitive
position regionally to attract to attract businesses into the state,
(01:03):
to attract capital into the states. So that's the idea
behind it.
Speaker 1 (01:07):
And that's important because if you have the higher tax rates,
you have people who are you know, entrepreneurial minded and
you know, business leaders, and you know, if it's too
expensive for them to do business in the state of Ohio,
they'll take their ball and go somewhere else.
Speaker 2 (01:21):
Right, Yes, and Ohio has a reputation, whether it's fair
or not, to being at least business unfriendly. And you know,
again that we could debate whether that's a fair assumption.
But at the moment, all the states are out it. Again,
except for West Virginia, have flat tax and so there's
been a flat tax revolution at the state level really
for the last ten years or so. You now have
(01:43):
fourteen states that have a flat tax, you have nine
states that don't have an income tax at all, and
then you have the rest of the states that have
these these graduated progressive income taxes. So Ohio's trying to
signal that they are going to be more market oriented
and friendly in this case.
Speaker 3 (02:00):
I don't know that that's a bad thing.
Speaker 1 (02:02):
Critics of this they see, you know, a tax cut
for the wealthy. I don't know if one hundred thousand
dollars a year annually is wealthy or not when that's
a different discussion.
Speaker 3 (02:12):
But let's for this argument say that it is.
Speaker 1 (02:15):
They say that unfairly you know, gives them a tax break,
and you know the folks in Ohio making you know,
between like twenty six grand and one hundred grand don't
get any tax breaks at all.
Speaker 2 (02:26):
Well, that's going to depend on what deductions and exemptions
they end up eliminating as well. And if you if
you lower the tax rate, but you brought in the base,
that is what your tax in the rate is lower,
so you lose the disincentives when you're earning more income,
but at the same time, your your tax revenue could
stay the same, it could increase. A lot of estimates
(02:48):
have it decreasing right now. The question that I would
have is two fold. If if you're going to do
tax relief, it's always going to be on people that
are that are paying the taxes, and no one is
asking for a higher rate for those earning under one
hundred thousand. So if you're don't go to a flat rate,
it's going to be it has to be a tax
cut for those who are earning more or a tax
(03:09):
increase for those who are earning earning less. So that's
the big question. And then the second one is, let's
say it does cost revenue that the billion dollars that
some are estimating would cost, is that a billion dollars
that the state has to spend. There's nothing magical about
the number in the budget of what Ohio is going
to spend. And so those those are questions that you
(03:31):
really have to consider when you look at the proposal
as a whole.
Speaker 1 (03:33):
Yeah, and again not to be at the dead horse here,
but the folks making you know, one hundred.
Speaker 3 (03:38):
Thousand dollars or more.
Speaker 1 (03:40):
You know, these are folks who invest in businesses, in
real estate and stocks and potentially create jobs.
Speaker 3 (03:45):
And it's the whole that trickle down theory, right.
Speaker 2 (03:51):
Triggered down.
Speaker 1 (03:51):
It's such a such a loaded loads, I get it,
but that essentially that's what that's what it is, is
that the people at the top create opportunities for people
willlow them.
Speaker 2 (04:01):
We're not created. You want to create a system where
you're not disincentivizing additional production. And so if we could
start from scratch completely, most economists would want a consumption tax,
because that is taxing what you're taking out of the
economy rather than what you're putting in. We'd remove taxes
on savings and interest, but a flat tax is the
(04:23):
next best thing because we're never starting from a completely
blank slate.
Speaker 3 (04:27):
Okay, so you brought up consumption tax.
Speaker 1 (04:28):
I'm glad you did, speaking by the way with doctor
Jared Pinson, professor of econ at Cedarville University. So amongst
the would you say eight or nine states that have
no income tax at all, including Florida, Tennessee, Nevada, and
a handful of others. How did they offset having no
state income tax?
Speaker 2 (04:47):
Yeah, so the main thing they do is they have
a higher tax on consumptions, a tax on retail. It
could be a sales tax. Some states like Florida can
also tax tour more. That makes a lot of sense.
A lot of people go to to Florida for touruses,
but it's mainly in the sales tax. So yeah, you
have to raise revenue in some way. So if you're
(05:09):
going to remove an income tax, the consumption tax is
going to be higher, or they're just going to simply
have lower spending paired with that. So that's the main
way that they go about it.
Speaker 3 (05:18):
So what would we do in Ohio.
Speaker 1 (05:20):
If we're going to, you know, cut taxes for a
certain segment of people making over one hundred thousand dollars
a year, how do you how do you offset? How
do you bring that money back elsewhere?
Speaker 2 (05:32):
Yeah, the first thing you could do is it can
remove certain exemptions, and that's where the bill right now
is a little vague as to what they are doing.
So the other thing is increasing as we mentioned taxes elsewhere.
One of the proposals is to increase the cannabis tax.
It's a ten percent statewide plus the individual county levies.
(05:52):
The proposals to put it up to twenty percent. I
don't know how much revenue that itself is going to bring,
but that's the direction that you'd want to move to.
Or is looking at at items that are not going
to cause distortions. What we mean by that is if
you tax this, I'm going to avoid that. I'm going
to go over here that which isn't tax And that's
what a flat tax is meant to avoid in general,
(06:16):
is people bouncing around trying to avoid the tax.
Speaker 1 (06:19):
So I think the proposal is to is it to
slowly implement this or is it based on just a
certain fiscal year or calendar year that all of a
sudden it'll kick in.
Speaker 3 (06:31):
How would this be? How would this get underway in
the state of Aile.
Speaker 2 (06:35):
It's a two step process that there would be the
initial the tax going to the flat rate. Excuseually wouldn't
happen all in one step. There'd be an initial tax cut,
and then we would get another tax cut to get
to that flat two point seventy five percent, so that
the initial cut would be this year, and then we'd
get into flat tax into next year. Because steners would
(06:58):
know Ohio is in a biannual buy jet, uh so
it wouldn't. It doesn't have to happen in one step.
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