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The Ohio legislature passed HB483 on Wednesday, June 4th, approving $400 million in tax cuts. The tax cuts benefit the wealthiest Ohioans the most and drain funds needed to invest in the great public services that strengthen our communities. Dozens of individuals testified throughout the Mid-Biennium Review process on where Ohio needs to invest – adult protective services, addiction treatment, housing, children services, local governments, infrastructure, food security, education, prison security and much more.
A QUICK SUMMARY OF THE TAX CUTS:
Pass Through Entity Tax Cut: Ohio has no corporate income tax, but some business owners – such as lawyers and accountants in private practice – claim their business income on their personal income tax returns. These individuals are exempt from paying tax on their first 75% of income (up from 50% in HB59).
The Problem: This tax cut is intended to spur job creation – but businesses expand business based on consumer demand, not tax cuts. This will re-direct $290 million into the pockets of mostly wealthy individuals who have no intent to hire new people.
Income Tax Cut: HB59 (June 2013) included a 10% income tax cut phased in over 3 years – with the final phase in coming in 2015. HB 483 speeds up the tax cut to all go into effect in 2014.
The Problem: The original tax cut was based on a theory that tax cuts lead to jobs – despite research and evidence to the contrary. This will provide nearly $100 million primarily for the wealthiest Ohioans.
EITC: The bill expands Ohio’s Earned Income Tax Credit from 5% of the federal level to 10% of the federal – a step in the right direction.
The Problem: While this is a step in the right direction, an EITC is most effective when it is refundable. Without refundability of the credit, many will not benefit from this policy. This will provide only $17 million for low and middle income Ohioans.
Personal Exemption: The personal exemption amounts will be increased for individuals making less than $80,000 a year. This policy will reduce the tax load for middle income Ohioans by about $73 million a year.
The Problem: It is important to make Ohio’s tax system less regressive and credits and exemptions for low and middle income Ohioans is an important step. However, this overall plan will only provide about $36 or $3 a month to middle class families.
