Ohio’s Revised Budget Proposal Makes Tax Code ‘Fairer’ But Punishes Small Businesses Retroactively, Conservatives Say

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A revised state budget proposal unveiled Thursday by House Republican leadership would introduce substantial income tax cuts for Ohioans but would do so by eliminating tax breaks for small businesses.

The budget plan, House Bill 166, builds off of the budget proposal put forward by Gov. Mike DeWine, who said Friday that the bill sticks to the “essential principles” of his proposal.

Under the proposal, Ohio’s lowest tax brackets would be completely eliminated, such that earners who make $22,250 or less annually wouldn’t pay any state income taxes. The state’s middle two brackets would also see significant reductions in income taxes.

But these income tax reductions would be partially paid for by cutting down on the state’s small business tax deduction. Currently, small businesses don’t pay taxes on the first $250,000 of income, but that would be lowered to $100,000 under the new budget proposal.

“We shouldn’t try to pick winners and losers. What we should try to do is set a balanced field out there and let people compete in business,” House Speaker Larry Householder (R-Glenford) said when unveiling the proposal.

The Buckeye Institute, an Ohio-based conservative think tank, believes that Republicans are making a mistake in not lowering tax rates for all Ohioans.

“These changes will make Ohio’s tax code fairer and simpler. However, in not using the savings to lower tax rates for all Ohioans across the board, the change in the small business tax deduction will increase taxes on Ohio’s entrepreneurs and small businesses, which will harm economic and job growth across the state,” the group said in a press release. “Furthermore, some tax changes will take effect at the start of 2019—effectively changing the rules mid-game—and will retroactively punish people who made business decisions based on existing rules.”

The budget proposal also eliminates the film credit deduction, an annual $40 million tax break for the film industry, as well as the NetJet deduction for private jets.

“While this budget does much to address Ohio’s most pressing challenges, there is much more that can be done to reduce needless spending and further cut government waste, which will enable Ohioans to keep more of their hard-earned money,” The Buckeye Institute added.

House Democrats are on board with the revised budget proposal and called it a “more realistic blueprint” for Ohio’s fiscal future in a press release Thursday.

“I am proud of our Democratic members and their work to make this a better budget by including our key tax priorities,” said House Minority Leader Emilia Strong Sykes (D-Akron). “Walking back a tax system rigged against working people will help our state better live within our means and let working families have a better chance to get ahead.”

Lawmakers have until a June 30 deadline to pass a state budget.

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Anthony Gockowski is managing editor of Battleground State News, The Ohio Star, and The Minnesota Sun. Follow Anthony on Twitter. Email tips to [email protected].
Background Photo “Ohio House of Representatives Floor” by Joshua Rothaas. CC BY 2.0.

 

 

 

 

 

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