How Much of My Income Does Ohio’s Municipalities Take?

Last month we posted our first blog for the entire tax map series. The first blog focused on the income tax rates that the states collect. When we looked at Ohio’s income tax rates, we noticed that through the years Ohio has been decreasing the tax rate for both the highest and lowest income brackets, thus placing the Buckeye State as one of the more favorable locations in terms of income tax structure. But what about the income tax spread within the state?
This week, we thought it would be interesting to see the geography of income tax rates in the state. The map below shows the income tax rates for the state that are levied at the municipal level.

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Our offices are located in Upper Arlington in Franklin County; the income tax for residents of this municipality pay about 2.00% of their income to the city. Although this is higher than the state’s municipal average of 1.43%, it is still not as high as Akron, Dayton and Toledo at 2.25%, Columbus at 2.50% and Parma Heights at a staggering 3.00% (the highest in the state).
When looking at where these high rate municipalities are located, they generally are near the largest cities in Ohio like Cleveland, Columbus, Cincinnati, Akron, Toledo and Dayton (with the exception of a few rural municipalities levying a similar rate). In Ohio’s many rural communities (generally outside of the metropolitan reach of the cities mentioned above), the income tax rate ranges from 1.00% to 1.99% (the light blues and yellows on the map). These are generally the lowest taxing municipalities in the State, and due to the many rural municipalities, they bring down the average of the state’s municipal income tax rate to its current 1.43%.
If you work in one of Ohio’s largest cities, but don’t want to pay a high income tax, there are some municipalities near these large cities that offer lower income tax rate, like the east side of Columbus, the northwest side of Cincinnati and the west side of Cleveland
Now for the questions.
We know that the income tax collected goes towards the budget of each municipality. With this in mind, the largest cities in Ohio have the higher taxes, thus a higher budget than the rural municipalities. That’s a given. But why do these smaller municipalities not increase their rate? Is it low because they are trying to attract people to their “cities”, towns and villages? Or are they low because the residents in these taxing municipalities generally have a lower average income than those in and around the largest cities? Or (and this is the most plausible) is it low for both of those reasons and to make up for that low tax rate, these municipalities have higher tax rates in other areas?
In Ohio, you’ve got the higher taxing large cities and the lower taxing rural municipalities. Find where you live and where you work to see what you are currently paying in income tax and what you could be paying. Perhaps living in a township rather than a municipality has its tax benefits, and in Ohio you’ve got many of these townships, but there are many factors taken into consideration that affect your decision in where you live and work.
Hopefully our maps have helped you understand the tax world, because we’ve learned a lot ourselves about the complex, messy, diverse or whatever you my call it, world of taxes.
Next week, we’ve got a fun break from these tax maps! We’ll be looking at football teams in Ohio and where their players come from. We can’t wait to see these maps!