Senate bill would create new tax break for affluent Ohioans
Posted February 09, 2021 in Press Releases
Yet the recently unemployed pay state income tax on their benefits
A bill pending in the Ohio Senate Ways & Means Committee would create a major new tax break for some Ohioans who make more than $250,000 a year, while leaving the state income tax as is on unemployment compensation (UC) Ohioans received last year. That’s what Zach Schiller, research director of Policy Matters Ohio, said in written testimony about Senate Bill 18 to the committee today.
“Do you want to allow Ohioans to be blindsided by a tax on UC benefits they can ill afford, while you legislate a windfall to some of our most affluent residents?” Schiller asked the committee. “Instead of providing new tax cuts for well-to-do Ohioans by passing SB 18 as is, you should decouple Ohio from federal tax law. At the same time, you should part ways with federal tax policy and end — or at least reduce — taxation of unemployment benefits.”
The bill would make Ohio’s tax code conform to the federal tax law. Usually, that’s an uncontroversial step. However, in December, in its COVID relief package, Congress approved a new tax break for recipients of loans under the Paycheck Protection Program (PPP). This not only eliminated the federal income tax on the forgiven loans, it also allowed businesses to write off expenses the loans paid for. Because of existing breaks in Ohio’s tax code, this will only reduce the state income tax for those with more than $250,000 in business income.
“This is a classic double dip for wealthy Ohioans,” Schiller said. The federal bill also reinstated a deduction for business meals and entertainment widely known as “the three-martini lunch deduction.”
Yet recipients of unemployment compensation, who must pay state income tax on it, weren’t even allowed the opportunity to have the tax withheld from their checks, as they can with federal tax. An official at the Ohio Department of Taxation said Thursday that the department would welcome a change in that policy. Lawmakers should tweak the law to allow that, Schiller said. He recommended committee members amend Senate Bill 18 to decouple from the two new tax breaks, and that the savings help allow Ohio to cut the state income tax on unemployment benefits.
Read more about the tax on UC benefits and the PPP tax break in Zach’s blog.