It’s been nearly a month since the House passed House Bill 49, the state’s biennial budget, moving it along to the Senate for that chamber to take a crack at. The four Senate Finance subcommittees heard testimony on the budget bill for the better part of three weeks, and finally this week the full Senate Finance Committee got its first chance to dig deeper into the bill.
The Ohio Chamber shared its perspective on some key budget concerns on Wednesday, May 31. Our testimony focused on the main issues that would most dramatically impact Ohio employers. These include taxes, health insurance mandates, environmental regulations, and workforce development initiatives.
Businesses can be relieved that there is clearly no appetite in the Senate for restoring the main elements of Gov. John Kasich’s original tax reform proposal, which would have delivered a $39 million net personal income tax cut – but only after also raising a variety of business taxes. However, businesses – particularly small business owners – aren’t completely out of the woods just yet.
Some type of adjustment to the recently enacted small business tax cut, which makes business owners eligible for a 100 percent tax deduction on the first $250,000 of their business income and taxes any remaining business income above these thresholds at a flat three percent rate, is rumored to be under consideration.
The reason this particular tax reform may be targeted is because current fiscal year income tax collections are coming in significantly below estimates. This, in turn, has caused Ohio’s budget agency to revise its original HB 49 revenue projections downwards by at least $800 million, and left lawmakers struggling to figure out how best to still craft a balanced budget. Fortunately, the Senate is focusing primarily on doing so by reducing spending, not by raising taxes. However, if you’re concerned about the legislature potentially jeopardizing your ability to fully utilize this tax cut, now’s the time to reach out to your state lawmakers and let them know.
The first round of Senate changes to HB 49 are expected the week of June 12. Businesses that struggle to comply with Ohio’s complicated municipal income tax system should anticipate good news: the elimination of the “throwback” rule contained in HB 49 is expected to be left intact by the Senate. Ending this practice would prevent cities from unfairly taxing businesses on sales made to customers not located in that or any other Ohio city.
In addition, the Ohio Chamber has been making the case for why the Senate should permit businesses to opt-in to having their municipal net profit tax administered by the Ohio Department of Taxation, thus allowing them to complete and file a single form and make just one payment, rather than file separately with each municipality in which they do business. We anticipate the Senate adding this change to HB 49, as well.
The Senate is expected to make further changes the following week, with a vote by the full Senate on HB 49 tentatively planned for June 21. That would leave lawmakers a little over a week to hash out the differences between the House and Senate versions of HB 49. With the fiscal year-end looming on June 30, the process for completing the next budget is finally nearing its end.