Last Minute Tax Cuts Pass
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.