A Republican-sponsored bill would allow Ohioans to deduct the profits from sales of real estate, stocks and other investments from their state income tax. Its sponsor said exempting capital gains from state taxes would help economic development across the state, and it's an idea that's been promoted by Republican candidate for governor Vivek Ramaswamy.
But an analysis from legislative researchers shows nearly all of the benefits in this bill would go to the wealthiest Ohioans.
Rep. Tom Young (R-Washington Twp.) said by repealing capital gains taxes in Ohio, House Bill 617 would remove a barrier that discourages economic investment. And he said everyone in the state will benefit, from small businesses to big investors.
“The hope is it would incentivize more people. And that's really the key here," Young told reporters last week.
In the fiscal note prepared on the bill, researchers with the Legislative Service Commission estimated it could cost the state between $615.0 million and $645.6 million in tax year 2027 and $647.8 million and $679.8 million the following year.
And a memo from LSC obtained by the Statehouse News Bureau also shows more than half a billion dollars of that—81.6% of the overall benefit—would go to Ohioans making more than $200,000 a year. Ohioans in the income brackets under $200,000 would get the remaining 18.4% of the benefit, with people under $100,000 getting 7.3%.
People in the $100,001-$150,000 bracket would see 4.5%, and those making between $150,001-$200,000 would get about 6.7% of the total benefit. The median income in Ohio in 2024 was $71,389, according to the U.S. Census.
Young said LSC used what he called "a stagnant approach" in developing its revenue loss estimates, while he used "dynamic scoring" in coming up with his numbers. He said repealing capital gains taxes could cost Ohio as little as $185 million in a weak market year, between $285 million and $305 million in a normal market year, and and up to $650 million in a strong bull market year.
But Young said the payoff would be worth it, and used two decades of state income tax cuts as an example.
"We cut the income tax. What did we see? Increase in revenue," Young said. "You put more money into people's pockets and they spend more, they invest more, they expand and they grow. Whether it be in their retirement funds, whether it be on buying new goods and services, or whether it means a capital investment into one's company, those are the positive things that in a free market, when you allow people to have more money in their pockets versus handing it to the government—which the government does a terrible job of spending our dollars—I'd rather have it in the citizens' pockets."
But a progressive research group said tax cuts since 2005 have cost the state $17 billion a year. Policy Matters Ohio also said the 2.75% flat tax instituted in last year's budget will cost the state approximately $486.2 million in fiscal year 2026 and $1.03 billion in the next fiscal year.
