House and Senate Leaders Unveil Budget Tax Reform Plan

Speaker of the Ohio House William G. Batchelder (R-Medina) and Senate President Keith Faber (R-Celina) today were joined by Chairman of the House Finance and Appropriations Committee Ron Amstutz (R-Wooster) and Chairman of the Senate Finance Committee Scott Oelslager (R-North Canton) at a press conference to unveil a series of comprehensive tax reforms to be incorporated into the state operating budget.

The members of the House and Senate discussed a framework that builds upon the tax relief in the previous budget by including significant and much-needed tax cuts for Ohio’s taxpayers and small business owners. The tax reforms included in Amended Substitute House Bill 59 will provide nearly $2.6 billion in tax relief to Ohioans over the next three years, specifically by initiating a 50 percent small business tax cut and a reduction in the personal income tax rate by 8.5 percent in FY 2014, 9 percent in FY 2015, and 10 percent in FY 2016.

“Ohio is successfully emerging from one of the most pivotal economic periods in its history, the time during which House Bill 153 closed an $8 billion budget imbalance without raising taxes on a single Ohioan,” said Speaker Batchelder. “We have 147,000 new jobs in this state in the past two years. That is what has taken us up 13 points in terms of desirability of this state for a place to do business. It’s a privilege for me to have the opportunity to see this dramatic change.”

“Through this revolutionary plan, we are closing tax loopholes, and creating a flatter, fairer tax system that helps all Ohioans,” said President Faber. “Our plan tells entrepreneurs and business owners that they are welcome and wanted in Ohio. It’s a plan that lets Ohioans keep more of their hard-earned money to spend on their families. Today we are telling people across this great nation that Ohio is again open for business and we are the best place to live, work, and raise a family.”

In addition to providing vital tax relief to Ohio’s taxpayers and small business owners, the reforms will modernize and streamline Ohio’s complicated tax code. Specifically, it moves Ohio’s tax code away from income taxes and more toward consumption taxes, as well as initiating property tax reforms and eliminating other exemptions, credits and loopholes.

To create a more attractive, job-friendly tax climate in Ohio, Am. Sub. H.B. 59 capitalizes on a widespread consensus among leading economists that an emphasis on consumption taxes—rather than income taxes—fosters a more pro-business economy. The proposal will:
• Adjust the state sales tax rate from 5.5 to 5.75 percent.
• Ensure that products delivered electronically are now subject to Ohio’s sales tax, just as physical products are currently taxed.
• Ensure better online tax collection by expanding the collection of sales taxes to goods that are purchased through a catalog or through the Internet.

Am. Sub. H.B. 59’s tax plan also enacts property tax reforms that will:
• Index the Homestead Tax Exemption by providing the exemption to low-income seniors who earn less than $30,000, which will significantly reduce state government costs. Seniors who currently receive the exemption will continue to receive it under this plan.
• Increase property tax transparency and simplification by eliminating a taxpayer subsidy in which, starting in 1971, the state began paying a portion of homeowners’ property taxes. This scheme simply caused all Ohioans—including seniors and low-income Ohioans who didn’t own property—to pay higher taxes. The tax reforms in Am. Sub. H.B. 59 revert to a more simplified, transparent system in which property owners pay their entire property tax bill but also enjoy lower income tax rates.

The tax reforms unveiled by legislative leaders also include the elimination of other various exemptions, credits and loopholes, including proposals to:
• Equalize the treatment of tobacco products by taxing the cigarette-like products known as “cigarillos” at the same rate as that of cigarettes, better reflecting the nature of the product.
• Index the $20 personal exemption credit, preserving it for lower income Ohioans who earn less than $50,000.
• Lower the Commercial Activity Tax exclusion threshold from $1 million to $500,000, which broadens the tax base and has a minimal impact on larger businesses. The CAT rate would remain the same.
• Eliminate the gambling loss deduction so that Ohioans will no longer be obligated to underwrite the bad luck of gamblers.
• Equalize treatment for magazine purchases to ensure that, like magazines that are purchased at a newsstand, magazines that are purchased through a subscription are subject to the sales tax.

“This is a series of initiatives that also have had input from outside expertise as well as inside expertise within our General Assembly,” said Rep. Amstutz. “The reason this is really important is because—as we talk about making our economy stronger—this is about people. This is about helping our citizens move up economically, and in order to do that we have to lay track for them to have better employment. The tax code alone cannot do that, but this is one thing that we can control as legislators. Our tax policy can help our state get stronger, the governor is leading in that direction, and we are with him.”

“The key to this proposal is to make Ohio the most attractive place in the nation for job growth and job creation to help middle class Ohioans,” said Sen. Oelslager. “By cutting taxes on all Ohioans, we will allow them to save for their kids’ college education, buy a reliable vehicle, or invest in their family home. We are sending the message across the world that Ohio is great place to live, grow, prosper and achieve your dreams.”

Both the House and Senate Ways and Means Committees will review the proposals in the coming days.

House and Senate Leaders Unveil Budget Tax Reform Plan (PDF)