Tax Policy emerges as the big issue in Ohio’s Budget Debate

With the recent passage of House Bill 166, the Ohio House version of the state operating budget for fiscal years 20’-21’. For the first time in recent memory the operating budget passed the Ohio House with almost unanimous support from both Democrats and Republicans with a vote of 85-9.

One of the more significant changes proposed in House Bill 166, deals with how the state taxes small businesses as well as the state income tax. The familiar issue of tax reductions and tax policy drove debate over the past few weeks as the budget bill moved through the committee process. 

The latest version of the budget proposal changes the way Ohio taxes small businesses, as well as recommends the overall reduction of Ohio’s income tax and the elimination of taxes on individuals making less than $22,250.

The Ohio House has proposed changing the current policy, which allows a small business to pay 0% on the first $250,000 of income. Changes include reducing the threshold from $250,000 to $100,00 and eliminating a flat-rate of 3% on any income above the now proposed $100,000 figure. 

The small business tax changes match the policy proposals championed by Ohio House Democrats as well as many outside policy thank tanks. From the creation of the small business tax deduction the tax policy has faced criticism over what many have referred to as the LLC, loophole, which allows high-wealth earners to pay little to no income tax on their income to the State of Ohio. 

On the other side of the issue members of the Ohio business community spoke out this week objecting to the changes to how Ohio taxes small businesses. The Ohio Chamber of Commerce as well as the National Federation of Independent Businesses or NFIB both testified in opposition to the proposed reduction from $250,000 to $100,000 asked for the restoration of the provision saying the proposed changes raise taxes on their members to then reduce taxes on other Ohioans. 

Additionally, the Ohio House is recommending an across-the-board reduction to the Ohio income tax of 6.6% for all income tax brackets. House leadership explained the proposed changes are designed to create a fair tax system across the board, which lowers taxes for everyone and not just a few. 

House Bill 166 makes a number of other tax changes including the elimination of the Ohio Film Tax Credit, the sales tax exemption for purchases of precious metal coins and bullion, and tax breaks dealing with corporate jets. 

Now that the bill moves to the Ohio Senate where many members of the chamber have in past years championed the small business tax cuts and their success for job creation and reinvestment in the Ohio economy, meaning this topic is certain to spur additional debate. 

For details on the proposed changes and specific language in the bill you can visit