COLUMBUS – A bill that seeks to avert an unintended tax increase on some small businesses has cleared the Ohio Legislature.
The House passed the budget-correcting measure with an 84-6 vote Tuesday, and senators then gave their final approval. The bill now heads to Gov. John Kasich for his expected signature.
Supporters say the legislation will ensure that no taxpayer will pay a higher marginal tax rate on business income for the 2015 taxable year than he or she otherwise would have paid if the state budget had not been enacted.
“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 (R-Upper Sandusky), Chairman of the House Ways and Means Committee.
The state operating budget signed by Kasich in June included a provision that provided a 75 percent income tax cut for small businesses on the first $250,000 of income and 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.
“As it turns out, a simple flat tax may not be so simple after all,” said Rep. Jack Cera (D-Bellaire).
“We warned during the budget process that a three percent flat tax would end up hurting many small business owners across the state. Now, just months later, we already have to clean up the mess of a hastily crafted tax policy,” said Minority Leader Fred Strahorn (D-Dayton).
The bill also seeks to restore some money that schools lost in a tax change vetoed from the budget by Kasich. School districts affected by the lost tangible personal property tax reimbursement could see an estimated $44 million.