COLUMBUS—The
Ohio House of Representatives passed legislation that corrects language
in the state budget bill dealing with tax cuts for small business
owners and funding
for schools in relation to phase-outs of the Tangible Personal Property
tax.
“While
Senate Bill 208 allows us to make certain that taxpayers keep more of
their dollars, it also gives the legislature the ability to better
support many of Ohio’s schools in a substantial
way,” said Rep. Jeff McClain, Chairman of the House Ways & Means
Committee.
The
state operating budget (Am. Sub. HB 64), which was signed by Governor
Kasich in June, included a provision that provided a 75-percent income
tax cut for small businesses
on the first $250,000 of income, with a flat 3-percent income tax rate
on income above that level.
However,
the way in which the bill was drafted could have resulted in
unanticipated and unintended tax hikes for some small businesses. For
example, a business earning
less than $40,000 after the 75-percent deduction would see its taxes
increase. That is because, under Ohio’s progressive income tax system,
rates up to about $40,000 are less than 3 percent.
Senate
Bill 208 applies a progressive tax rate structure for TY’15 up to
$40,000 of income. It then levies a flat 3-percent rate on income above
that level. This ensures
that no taxpayer will pay a higher rate than in 2014, and it reduces
taxes on Ohio’s small businesses by $84 million over the next two years.
In
addition, SB 208 addresses language in HB 64 regarding supplemental
funding to protect school districts from the Tangible Personal Property
tax reimbursement phase-outs.
The state budget bill allowed the TPP phase-outs to continue, but
provided a temporary back-fill of funding to protect schools from the
phase-outs. For FY’17, Senate Bill 208 provides a supplement of 96
percent of what a school district would have received.
Specifically,
SB 208 ensures that no school district receives less than 96 percent of
what they received in FY’15 in foundation formula aid and TPP
reimbursement payment.
The legislation now returns to the Senate for further consideration.
