Ohio lawmakers are kicking around a tax change that could rewrite a big chunk of the state’s revenue playbook. A new proposal, House Bill 617, would erase state and municipal income taxes on capital gains, a move supporters say will lure investment and skeptics warn could carve hundreds of millions out of public budgets. The bill, introduced by Rep. Tom Young, is parked in the House Ways and Means Committee while lawmakers and number crunchers argue over how deep the hit could go.
What the bill would do
Young told colleagues the proposal is intentionally narrow. "House Bill 617 exempts net capital gains from both Ohio state income tax and municipal income tax," and it leans on federal definitions so taxpayers are not juggling extra forms or brand-new rules, according to his testimony filed with the Ohio House of Representatives. He emphasized to the House Ways and Means Committee that wage tax rates would stay put and cast the bill as an effort to spur capital formation and reinvestment in Ohio companies.
How lawmakers would measure the impact
The bill text orders the Director of Budget and Management to deliver a formal report on the law’s fiscal fallout, spelling out changes to revenues and taxpayer behavior, by June 30, 2027, as detailed in the legislation. The exemption would apply to taxable years ending on or after the bill’s effective date, so the calendar becomes part of the political fight over what happens next. The full language is posted on the Ohio Legislature website.
Budget hit officials warn about
Early estimates are already raising eyebrows at the Statehouse. The Columbus Dispatch reported the change could drain as much as $680 million a year from state revenue. Opponents argue that losing money on that scale would crank up the pressure on funding for schools, Medicaid and other services that live or die on the state’s general revenue stream.
Who stands to gain — and lose
Backers pitch the repeal as a break for small business owners selling companies, retirees cashing out investments and other taxpayers realizing capital gains. Critics counter that the biggest winners would be higher income households and investors who already enjoy multiple tax advantages. Ohio would join a relatively small group of states that skip state-level taxes on capital gains, a trend documented by the Tax Foundation, and that status is a central talking point for both sides.
Policy groups that track Ohio’s tax code warn that a long series of exemptions has already narrowed the state’s revenue base and that lawmakers will have to decide which programs to shield if the capital gains break moves forward. Policy Matters Ohio has outlined that concern in its analysis of what it calls ballooning tax breaks.
What’s next
HB 617 was introduced in December 2025, sent to the House Ways and Means Committee and presented there during Young’s Feb. 25 sponsor testimony. For now it remains bottled up in committee. Legislative trackers list the bill as active but not yet reported out, which means there is no firm schedule for amendments or a floor vote. The bill record is available on LegiScan.
The required report from the Director of Budget and Management, due June 30, 2027, is expected to give lawmakers harder numbers to argue over. Until then, HB 617 is already fueling a familiar Ohio showdown over competitiveness, tax breaks and which public services, if any, officials are willing to trim in the name of becoming more attractive to investors.
