Report on Ohio’s Tax Reforms and Alignment with Sustainable Development Goals

Executive Summary

Over a twenty-year period beginning in 2005, the state of Ohio has systematically implemented tax reduction policies, culminating in legislation signed in July 2025 to establish a flat tax system. This long-term fiscal strategy is designed to enhance the state’s economic competitiveness by incentivizing entrepreneurship, investment, and labor force participation. These policy objectives show a strong alignment with several key United Nations Sustainable Development Goals (SDGs), particularly those focused on economic growth, innovation, and institutional partnerships.

Ohio’s Long-Term Tax Reduction Strategy

Legislative Progression to a Flat Tax

In July 2025, Governor Mike DeWine enacted legislation that represents a significant milestone in Ohio’s tax reform history. The new law mandates a two-step transition to a flat tax system:

1. In 2025, the state’s top individual income and capital gains tax rate will be reduced from 3.5 percent to 3.125 percent.
2. In 2026, Ohio will adopt a single flat tax rate of 2.75 percent.

This reform is the latest in a consistent series of tax reductions initiated in 2005. The state’s top marginal tax rate has been progressively lowered from its 2004 level of 7.5 percent. Additionally, Ohio’s corporate income tax was eliminated in 2014.

Historical Tax Rate Reductions (2004-2026)

• 2004: 7.5%
• 2005: 7.185%
• 2007: 6.555%
• 2008: 6.24%
• 2011: 5.925%
• 2013: 5.421%
• 2014: 5.333%
• 2019: 4.797%
• 2021: 3.99%
• 2023: 3.75%
• 2024: 3.5%
• 2025 (Projected): 3.125%
• 2026 (Projected): 2.75% (Flat Tax)

Contribution to Sustainable Development Goals (SDGs)

The stated objectives of Ohio’s tax reform—to simplify the tax code, enhance transparency, and stimulate economic activity—directly support the framework of the SDGs.

SDG 8: Decent Work and Economic Growth

The primary goal of the tax reform is to foster a pro-growth environment. By reducing the tax burden on individuals and capital gains, the policy aims to:

• Promote development-oriented policies that support productive activities, decent job creation, and entrepreneurship (Target 8.3).
• Achieve higher levels of economic productivity through diversification and innovation (Target 8.2).
• Incentivize investment and attract small businesses, which are critical drivers of sustainable economic growth.

SDG 9: Industry, Innovation, and Infrastructure

The creation of a competitive tax environment is fundamental to building resilient infrastructure and fostering innovation. The move to a simplified, low-rate flat tax is intended to:

• Support small-scale enterprises by reducing compliance costs and freeing up capital for investment (Target 9.3).
• Enhance Ohio’s attractiveness to investors and innovators, thereby promoting sustainable industrialization.
• Establish a stable and predictable fiscal framework, which is a key component of supportive institutional infrastructure.

SDG 10: Reduced Inequalities

The reform’s emphasis on creating a “fairer, simpler, and more transparent” tax system aligns with the goal of reducing inequality. A simplified flat tax is presented as a mechanism to ensure a more equitable and understandable system for all taxpayers, potentially reducing the compliance gap between different income levels and promoting equal opportunity (Target 10.3).

SDG 17: Partnerships for the Goals

The 20-year duration of this tax reform initiative, spanning multiple gubernatorial administrations and legislative sessions, exemplifies a sustained domestic partnership. This long-term commitment demonstrates the capacity of state-level institutions to implement coherent policies for sustainable development, showcasing an effective model for achieving long-range economic goals (Target 17.14).

SDGs Addressed or Connected to the Issues Highlighted in the Article

• SDG 8: Decent Work and Economic Growth

  The article is fundamentally about economic policy designed to foster growth. It details a “pro-growth effort” in Ohio through tax reductions. The stated purpose of these policies is to improve “Ohio’s competitiveness, including its attractiveness to entrepreneurs, small businesses, investors and workers.” This directly aligns with SDG 8’s aim to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.” The article argues that these tax cuts will incentivize economic activity, which is a core component of this goal.

Specific Targets Identified Based on the Article’s Content

• Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises…

  This target is directly addressed by the article’s content. The tax legislation is presented as a “development-oriented policy” intended to stimulate the economy. The article explicitly states that the policy “incentivizes entrepreneurship” and enhances the state’s “attractiveness to entrepreneurs, small businesses, investors and workers.” The publisher of the article, the Small Business & Entrepreneurship Council, further reinforces the focus on creating a favorable environment for small and medium-sized enterprises, which is a key element of Target 8.3.

Indicators Mentioned or Implied in the Article

The article does not mention official SDG indicators, but it provides clear, quantifiable data points that can serve as indicators to measure the implementation of the policies discussed. These indicators measure the policy action itself, which is presented as progress towards the goal of economic growth.

• Reduction in the individual income and capital gains tax rate

  The article provides a detailed, year-by-year list of the reduction in Ohio’s top tax rate, which serves as a direct indicator of the policy’s implementation. It tracks the rate from 7.5 percent in 2004 down to the planned flat tax rate of 2.75 percent in 2026. This chronological data measures the intensity and consistency of the “pro-growth effort.”

• Elimination of the corporate income tax

  The article explicitly states that Ohio “also eliminated its corporate income tax as of 2014.” This is a specific, measurable policy change that serves as an indicator of the state’s strategy to attract businesses and investment.

• Transition to a flat tax system

  A key indicator mentioned is the structural change in the tax system. The article highlights that “Ohio will move to a flat income tax rate of 2.75 percent in 2026.” This shift is presented as a significant step that makes the “tax system fairer, simpler and more transparent,” serving as a qualitative indicator of institutional reform aimed at encouraging economic activity.

Table of SDGs, Targets, and Indicators

Source: sbecouncil.org