Senate budget gives business owners tax cut, none to other Ohioans

- May 28, 2013

Jim Siegel of the Columbus Dispatch put out this quick piece on the Senate’s budget proposal, citing the work of Zach Schiller and others who have pointed out that the business-income exclusion won’t be the engine for job growth it’s purported to be.

Ohio business owners would get a 50 percent state income tax cut on up to $375,000 worth of income, but other Ohioans would get none under changes by Senate Republican to the two-year, $61.5 billion budget….

The House-passed bill included a 7 percent across-the-board income tax cut. Gov. John Kasich proposed a much larger tax cut phased in over three years, but much of his tax plan was scrapped in the House after Republicans decided not to go along with his proposed sales tax expansion.

Senate Republicans removed that 7 percent cut and instead added a 50-percent tax deduction on business income.

Siegel quotes Senate President Keith Faber, R-Celina, on why he favors the business tax cut over an across-the-board cut for all Ohio taxpayers.

“Most people are going to know about a 50-percent income tax cut,” he said.

But Siegel continues, citing studies, including ours, that show the shortcomings of the Senate’s approach.

National studies say about 80 percent of those who file business income employ no one beyond themselves.

In 2009, of the 717,000 Ohioans who filed some sort of business income, 90 percent earned less than $50,000, qualifying them for a tax break of $1,000 or less under the proposed 50 percent deduction. A business owner earning $500,000 from profits would get a tax break of about $17,000, a level reached by 0.6 percent of Ohio business owners.

Figures from the Kasich administration show that 20 percent of the tax cut would go to out-of-state investors.

Critics of the plan, including Cleveland-based Policy Matters Ohio, have argued that most people who own a business or are self-employed have no interest in growing, and even if they do, demand for their product or service, not a relatively insignificant tax cut, is what will drive growth.

“This plan is very poorly targeted and is unlikely to result in significant new job creation,” said Zach Schiller, research director for Policy Matters Ohio, [to] a Senate panel last week. “The taxpayers who benefit on average would get so little that they couldn’t add employees in any meaningful way.”

Among other budget changes, Senate Republicans:

  • Left in place a House provision that essentially cuts off Planned Parenthood from federal family planning dollars by reprioritizing who qualifies for the money.
  • Removed a House provision that would have tied in-state tuition rates to the decision by state universities to give out-of-state students proof of residency so they can legally vote here.
  • Eliminated spider monkeys from regulation under the state’s dangerous wild animal law.
  • Created the Ohio coal license plate.
  • Increased Ohio tourism funding by $1 million per year.
  • Reinstated current law regarding automatic payments to educational service centers.
  • Made student academic growth account for 35 percent of a teacher’s evaluation, instead of the 50 percent in current law.
  • Restored the teacher minimum salaries in current law.

Senate budget gives business owners tax cut, none to other Ohioans


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