Ohio Governor Kasich Budget Proposal May Lead To Tax Cuts For Small Businesses
Feb 05, 2015
Governor Kasich’s two-year budget proposal includes income tax cuts for small businesses and individuals that would be partly offset by higher taxes on sales, tobacco, drilling and larger businesses.
The proposal eliminates income tax on all small businesses with annual gross receipts of $2 million or less at a cost of $696 million over two years. This is in line with the previous tax cuts on income reported on individual returns from limited liability companies, s-corporations, sole proprietors and other pass-through entities. In 2013, these taxpayers were able to exempt 50 percent of pass-thru income up to $250,000. In 2014, the amount is increased to 75 percent for one year only.
The $696 million loss in revenue would be partially replaced by an increase in the state commercial activity tax (CAT). The CAT would be raised from .26% to .32%, the first increase since its inception in 2005.
The budget would raise the state sales tax by half a cent to 6.25 cents on the dollar in addition to the county piggyback taxes. It also proposes to add tax on currently exempt services like cable, lobbying, debt collection and parking. Lucas county sales tax has already increased the sales tax by ¼ percent to 7.25 cents effective April 1, 2015.
Other tax increases include raising the tax on cigarettes by $1 to $2.25 per pack. The tax would include other tobacco related products such as e-cigarettes, chewing tobacco, and cigars. The severance tax on extraction of oil and natural gas would climb as high as 6.5 percent depending on whether the tax is applied directly to oil or gas drilled or on the processed end result.
The Governor pointed out that Ohio has regained thousands of jobs lost in the recession and the state has a current unemployment rate of 4.8 percent. He believes his budget proposal will help the unemployment rate decrease even further and create more jobs. A new budget must be approved and in place by July 1.
By: Diane Cook, Accountant