July 6, 2006
Governor Bob Taft has directed the Ohio Department of Taxation to revise the state income tax withholding tables to accelerate the benefits of the 21% income tax cut that is being phased in over tax years 2005-2009.
"Ohio's state government is living within its means. Our budget is the leanest this state has seen in 40 years. With stronger state revenues and lower state agency spending than expected, we can afford to accelerate the withholding cut and make a substantial transfer to the state's Rainy Day Fund," Taft stated.
Withholding tax rates will be cut an additional 8.4% beginning October 1, 2006. This cut will come on top of the 4.2% withholding cut that already occurred in January, 2006. State income tax withholding rates will be 12.6% lower than they were prior to tax reform.
The lower withholding rates will reduce state revenues and increase take home pay of Ohioans by approximately $390 million in state FY 2007.
A combination of stronger-than-estimated state FY 2006 tax receipts and significant under spending by state agencies will also result in a substantial transfer of funds to the state's Rainy Day Fund.
The state's Office of Budget and Management will be prepared to announce the exact amount of Rainy Day Fund transfer later next week.