Ohioans looking to save money on their next big retail purchase might
want to get to the store before Sunday.
That's when the state sales tax will increase a quarter of a percentage point to 5.75 percent as part of the two-year state budget.
That means if you are in the market for a $30,000 2014 Ford Taurus, you could save yourself $75 in state taxes if you buy it before the changeover. The increase, however, will amount to only a few pennies -- 50 to be exact -- if you plan to buy a $200 cellphone.
And while you will pay more on retail merchandise such as cars, clothing, electronics and school supplies, you will get more back in your paycheck in the form of an income-tax cut.
The statewide changes are a part of Gov. John Kasich's tax-reform budget that aims to decrease the overall amount Ohioans pay in taxes by $2.7 billion over three years, largely through cutting small-business taxes 50 percent on the first $250,000 of net earnings. Ohio workers also will see an 8.5 percent cut in their income tax this year, rising to 10 percent by 2015.
"Clearly, a 9 percent reduction is going to be more significant than the quarter percent on taxable sales," said Ohio Tax Commissioner Joe Testa.
For single filers, the tax cut translates to $45 in savings for someone earning $25,000 and $117 for someone earning $50,000, according to the Department of Taxation. That will be partially offset by the sales-tax increase that, Internal Revenue Service estimates show, would cost the first person about $20 more and the second about $28 more.
Testa said the sales tax will affect someone buying a large item -- a factor that hasn't gone unnoticed by George Kauffman, vice president of Byers Auto.
"It could have a possibility to affect us drastically," Kauffman said. "We have vehicles upwards of six figures, so to say it wouldn't impact a purchase would be silly."
Kauffman said he has seen an increase in traffic this month, but sales have remained consistent.
"Nobody likes taxes, but it's a reality," he said. "The fact is, if you planned on buying a vehicle, you're probably still going to. It's just something to deal with."
In addition to the statewide increase, Franklin County commissioners plan to vote next month to increase the county's sales tax by at least a quarter cent per dollar to help pay for a new jail and morgue.
With the sales tax rising, Focus for Ohio's Future recently released an economic analysis on the potential effects of a sales-tax holiday -- a group of days where certain items can be purchased tax free. Eighteen states offer such holidays.
"We found no raw shifting or significant losses, because when consumers make purchases at a store on discounted items they still make purchases on taxed products," said Michael Jones, director of research at the University of Cincinnati's Economics Center.
Jones said the study paid particular attention to the effects the holiday would have on the government, retailers and consumers, finding no major downsides for any.Bills in support of a tax holiday in Ohio have been introduced in the legislature but haven't gone anywhere.
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