On Thursday, the House Finance Committee revealed its first changes to the state budget, House Bill 166. Not surprisingly, the bill now contains numerous policy changes not in the as-introduced version of the budget first proposed by Gov. Mike DeWine back in April.

Most significant to Ohio businesses, the House added a $193 million tax increase on small business owners, entrepreneurs, farmers, and owners of pass-through entities. This is due to a proposed reduction of the Business Investment Income Deduction (BIID) from $250,000 of business income to $100,000. The House is also considering whether or not to also remove the 3% tax rate for business income above $250,000, which would mean this could end up being a much larger tax hike if it does.

The BIID was only finalized in its current form in 2015, and was originally enacted to encourage business owners to reinvest in their businesses. It was also put in place to equalize the unequal tax treatment of business income, since pass-through entities face taxes on both receipts under the Commercial Activity Tax (CAT) and on income flowing to owners, members, or partners under the personal income tax, while C corps simply pay taxes on receipts under the CAT.

Both the Ohio Chamber of Commerce and our Ohio Small Business Council view the BIID as an economic development tool and support retaining the deduction. To that end, we offered testimony earlier today asking for the current BIID to remain untouched.

Now we need your help. The Finance Committee is expected to vote the bill out of committee early next week, with a vote by the full House later in the week. We need you to take action immediately to urge your lawmakers not to raise taxes on Ohio’s small businesses. Click here to send a message to your state representative. Let them know you don’t support raising taxes on Ohio’s job creators and that doing so is counterproductive to helping grow the state’s economy!