Ohio House proposes 2 percent income tax cut

COLUMBUS — Ohioans would see an across-the-board 2 percent income tax cut totaling $380 million under a proposed two-year budget unveiled Tuesday in the state House of Representatives.

The move comes even as the state is in litigation with the federal government over a provision of the most recent coronavirus package, which appears to prohibit states that accept billions in aid from enacting tax cuts.

It was likely that the Republican-led General Assembly would again embrace a tax cut given robust state tax collections and an expected year-end surplus despite last year's coronavirus shutdown.

“As a fiscal conservative, I'm all for cutting taxes and being fiscally responsible,” said Rep. Haraz Ghanbari (R., Perrysburg), a member of the House Finance Committee.

The massive amendment accepted by the committee would also enact a new formula for distributing state aid to K-12 schools that has been in the works in the chamber for more than two years.

The plan would also provide less funding than what Gov. Mike DeWine had proposed for his H2Ohio program addressing the causes of toxic algae and other water quality issues across the state. The governor had proposed a 40 percent increase at $240 million over two years while the House plan would largely fund it at the current level of about $170 million.

The governor had envisioned H2Ohio to be a $900 million, 10-year program.

“I think we need a mechanism to accomplish what we proposed in House Bill 7 to have the funds endowed no matter what administration or General Assembly is in office,” Mr. Ghanbari said.

House Bill 7 passed the chamber last session, but the Senate removed the language establishing a long-term funding source for the long-term funding for the program before the governor signed it into law.

This marks the House's first stamp on Mr. DeWine's proposed spending plan unveiled in February that contained no significant tax cuts or hikes. The plan will likely undergo more changes before it clears the committee and the full chamber.

A final budget must reach the governor's desk before the start of the next fiscal year on July 1. The House version of the budget would spend roughly $74 billion over two years.

Rep. Erica Crawley (D., Columbus), ranking Democrat on the committee, said the tax cut would be “another Republican tax giveaway that largely benefits millionaires and billionaires isn’t what we need as countless Ohioans continue to feel the uncertainty of our current health and economic crisis.”

“Instead we should be working together to invest in child care, housing, and other areas to benefit working people and families and get Ohio back on the right track,” she said.

Democrats, however, praised the addition of the school funding reforms 24 years after the Ohio Supreme Court first found the state system to be unconstitutional because it relied too heavily on local property wealth.

Under the “Fair School Funding Plan,” which passed the House last session only to stall in the Senate, the formula's assessment of a district's wealth would be based 60 percent on local property tax valuations and, for the first time, 40 percent on residents' incomes.

The goal over time is for the state to make up the difference after determining what it costs to educate a student in each district. Of the state aid, 60 percent could go to direct instructional costs, 20 percent to building operations, 15 percent for instructional and student support, and 5 percent for district leadership and accountability.

Mr. DeWine had again proposed additional dollars for wrap-around wellness services like mental health treatment, counseling, and mentoring that are not directly related to in-classroom instruction. But he did not tinker with the state's school-funding formula to generally distribute state per-pupil aid to more than 600 districts.

The House proposal would incorporate those services as components of its formula.

When it passed the House last year, the plan would cost the state nearly $2 billion more a year when fully implemented over six years.

The House plan would also:

⿏ Void violations and penalties assessed to liquor establishments determined to have violated emergency coronavirus orders since March 14, 2020, orders refunds of any fines, and requires expungement of any record of the violations.

⿏ Appropriate $150 million in coronavirus relief assistance to bars and restaurants, the lodging industry, indoor and outdoor entertainment venues, and new businesses.

⿏ Provide $1 million and $250,000 each year, respectively, to the Lucas County and Fulton County land banks to demolish vacant commercial or industrial buildings with dollar-for-dollar matches required of participating entities like the counties and municipalities where the projects are located.

⿏ Provide $75,000 during the budget's first year for the Dental Center of Northwest Ohio for clinical equipment at its Toledo practice.

⿏ Again reinstate the on again, off again sales tax exemption for sales of precious metal bullion and investment coins that was repealed in the last budget. It would cost the state $5.8 million a year and local governments and transit authorities $1.7 million.

⿏ Prohibits the purchase of lottery tickets with credit cards.