Legislative Republicans’ 11th-hour tax proposal continued to receive mixed reviews on Monday, as lawmakers heard hours of testimony from small business owners, economists and representatives of public service organizations.
The tax plan unveiled late last week cuts personal income tax rates 10 percent over three years, raises sales tax rates by 0.25 percent, applies the Commercial Activity Tax to more businesses, cuts small businesses and pass-through entities a tax break and reduces state spending on property tax relief. The plan is expected to be inserted into the state’s two-year, $61.7 billion budget.
The result: A net $2.6 billion tax cut during the next three years that GOP lawmakers say will benefit nearly all Ohioans.
A parade of small business owners from around the state praised the tax plan’s pro-business aspects: a 10 percent personal income tax cut phased in over three years and a 50 percent income tax cut for pass-through entities, up to $250,000 of income. Many small businesses organize as limited liability companies, partnerships or S corporations and file business profit as income on personal income tax returns.
Kellie Sears, who owns Bobby’s Truck and Bus Repair in Fremont, told lawmakers on the Senate Ways and Means Committee the cuts would allow her to expand her business to southern Ohio.
“By saving money through this proposal, I can go out and buy inventory of school buses, I can pay our employees better wages, I can offer medical insurance — there are so many better avenues we can spend the money,” Sears said.
However, critics note the maximum benefit under the plan would be $6,666 and 80 percent of these tax filers, nationally, do not employ anyone other than him or herself.
The cut would cost more than $1 billion in the first two years — money several organizations and Democrats said would be better spent on education and government services, which were dealt major cuts in the 2011 state budget.
The cuts prompted many school districts and other jurisdictions to add local levies to make up for lost state revenue. Another piece of the tax package would end the practice of the state paying 10 percent and 2.5 percent of local levies.
The change would not affect how much money local governments receive from levies but would mean taxpayers pay the full amount on new and replacement levies enacted after 2013. For example, the Centerville City Schools levy that failed in May would cost a homeowner $241 a year per $100,000 of property value instead of $211 if attempted again in the future.
Kim Fender of the Ohio Library Council said the increase for the property taxpayer may make it more difficult for libraries to pass levies. Fender, who is the director of the Public Library of Cincinnati and Hamilton County, said levies proposed for the November 2013 ballot should be exempt from the changes.
“Libraries… have already passed their levy resolutions setting the levy millage,” Fender said. “There is not time left to make any adjustments in that millage.”
A bipartisan panel of lawmakers will review the tax plan and other pieces of the budget Tuesday afternoon before voting on a compromise budget bill. The final bill could receive full House and Senate votes as early as Thursday and be signed by Kasich this weekend, before the June 30 deadline.
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