Earlier today, the House passed, by a bipartisan vote, House Bill 110, the state’s operating budget for the next two fiscal years. The $74.7 billion state budget now goes to the Senate for its consideration. HB 110 needs to be delivered to and signed by Gov. Mike DeWine by the end of the current fiscal year, or midnight on June 30, 2021.
When the Governor unveiled his proposed budget back in early February, it was based on conservative economic projections and did not raise taxes. In fact, it contained no significant changes to the tax code. By law, it was a balanced budget proposal.
As we wrote about previously, the first round of changes to the governor’s proposal that were made by the House two weeks ago included a two percent across-the-board income tax rate cut on all nonbusiness income. This proposal would reduce the current top personal income tax rate from 4.797% to 4.701% beginning this calendar year and, coupled with changes in federal tax conformity, this tax reduction is projected to provide Ohio taxpayers up to $500 million in tax relief this biennium.
The House also incorporated major changes to the K-12 education funding formula and created the Broadband Expansion Grant Program, which seeks to deploy broadband service to some of the 300,000 Ohio households that currently lack access to high-speed internet. The long-awaited new school finance model, to be phased in over six years, is a cost and needs-based formula, crafted to address the actual cost of educating Ohio children and fairly distribute state dollars to local school districts.
Prior to its passage today, the House made additional changes to HB 110 yesterday, the most significant of which is the addition of an important economic development provision – a tax deduction for capital gains received by investors of Ohio-based businesses.
To qualify, the investor must have been in the business, either with substantial investment or creation of payroll, for five years prior to the sale of the investment. This forward-thinking step will incentivize more investment in Ohio, foster entrepreneurs and expand job opportunities.
The most recent changes also tripled the budget allocation for the TechCred Program to $25 million in Fiscal Year ‘22. TechCred, launched in 2019, assists employers in “upskilling” their existing workforce as well as attracting prospective employees by providing state grant dollars to businesses to help underwrite the training costs for employees pursuing industry-recognized, technology-focused credentials.
One of the key components of the governor’s original proposal, supported by the Ohio Chamber, remains intact in HB 110: grant relief for industries that have been hit especially hard by the COVID-19 pandemic. In particular, these industries include bars and restaurants, the hotel and lodging industry, entertainment venues and new businesses that had just been established when the pandemic hit in March 2020.