Republican leaders of the Ohio House and Senate on Thursday announced they had agreed to a major tax overhaul as part of the state’s two-year budget.
The new plan — the sixth major iteration of the state’s next two-year budget — would raise the 5.5 percent sales tax to 5.75 percent. The latest package also includes deeper income tax cuts than initially proposed by the House, but falls short of what Gov. John Kasich had introduced when he unveiled his “Jobs Budget 2.0” in February.
Since the governor and GOP lawmakers who control the House and Senate all support this blend of their tax proposals, the package is likely to end up in the final version of the budget, which Kasich must sign by June 30.
Under the latest proposal, Ohioans would receive a phased-in 10 percent personal income tax cut. An 8.5 percent cut from current rates would take effect in fiscal 2014, 9 percent the following year and 10 percent the next — although this budget applies only to the first two years.
“Our challenge is to overcome the disability of this state to have met the needs of its citizens, and indeed these two caucuses have done that in connection with the governor’s efforts to make Ohio the greatest location in the nation,” said House Speaker William G. Batchelder of Medina.
The Plain Dealer analyzed the combined impact of the proposed new sales and income tax rates and found that the higher the income, the larger the savings, both in terms of real dollars and the percent savings.
For example, a single person making $25,000 a year would save an estimated $26 in taxes, a 3.1 percent dip. A single person making $110,000 would save about $360, a reduction of more than 7 percent. The same trend held true for families.
The Republican governor initially proposed a phased-in 20 percent income tax cut, and hoped to drop the sales tax rate from 5.5 percent down to 5 percent, but bring in more revenue by applying it to more services.
Small businesses would get a weaker version of Kasich’s 50 percent tax break under the new plan.
The governor intended to give small-business owners who claimed small-business earnings on their personal tax filings a break on their first $750,000 in yearly income. The plan would now apply only to the first $250,000 in income, which would save small-business owners at best about $7,000 each year.
A Plain Dealer analysis earlier this year found that about 80 percent of small-business owners affected by the tax break would reap less than $400 in yearly savings.
Legislative leaders said the combined tax cuts total $2.6 billion over three years.
Democratic Sen. Nina Turner decried the budget’s current form.
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