State may roll back a tax break for small businesses

State may reduce a tax break for small businesses

Some Ohio Republicans are talking about reducing a state tax break for small businesses.

If the change occurs it would mean higher taxes for small businesses that used the tax break since it was first approved in 2013.

It’s not known if a majority will support a modified version of the total repeal called for by Democrats in the Statehouse, according to Ohio Sen. Peggy Lehner, R-Kettering, and Ohio House Minority Leader Fred Strahorn, D-Dayton.

“I happen to think that taking another look at the small business tax would be a very responsible thing to do,” said Lehner, who sits on the Senate Finance Committee.

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However a spokesman for Senate Republican leadership cast doubt on the chances of such a change being approved and it was not included in the budget that emerged Tuesday from the Senate Finance Committee.

“I’m not sure where you are hearing that from, the Democrats?” said John Fortney, spokesman for Ohio Senate Majority Caucus and Senate President Larry Obhof, R-Medina. “No, we aren’t raising taxes.”

Ohio Gov. John Kasich  does not support reducing the tax break.

"No, we don’t want to raise taxes in the state,” Kasich said after an unrelated news conference in Columbus on Monday.

Mike Rowe, communications director of the Senate Democratic Caucus, also said that based on Obhof’s previous comments he’s not sure the idea will gain traction. But he said updated state revenue projections could change the equation. Current projections call for a gap of approximately $1 billion over the two years covered by the budget, Rowe said.

“If the numbers show a little larger (revenue shortfall) than what they expected perhaps that would prompt them to do something with this tax cut,” Rowe said.

“We will be releasing revised revenue figures to the conference committee when Director (Tim) Keen testifies,” said John Charleton, communications director for the state Office of Budget and Management.

He said that may be as early as Thursday but he has not confirmed that.

The finance committee  on Tuesday approved about 150 Republican amendments and a few Democratic amendments to the Senate’s proposed 2-year, $130 billion state budget, which uses cuts to close an approximately $2 billion revenue shortfall over the two years.

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Democrats have called for the budget hole to be closed by ending a tax cut that allows small businesses to avoid taxes on the first $250,000 of earnings. The tax break, enacted in 2013 and 2015, covers businesses that organize as partnerships, sole proprietors or limited liability corporations.

The non-partisan Legislative Service Commission, which analyzes legislative proposals, has said that Ohio would gain $1.1 billion annually if the tax break were not in place.

The Democratic proposal calls for using the revenue to balance the budget without cuts and spend the remaining additional revenue on schools, local governments, health care, higher education and an additional $200 million to fight the opioid crisis. “We don’t have to cut our way out of the problem here,” Rowe said.

Strahorn said he has talked to Republicans who are willing to consider changes. He said the tax break has not resulted in companies creating more jobs. It and other tax cuts enacted by the Republican-dominated legislature have resulted in more of the tax burden being shifted onto everyday people, Strahorn said.

“They weren’t cutting most people’s taxes. Most of the tax (breaks) went to people at the top,” Strahorn said.

RELATED: Democratic leader says state tax cuts lead to higher local taxes

Lehner said she thinks there is evidence that some people have restructured their businesses to take advantage of the small business tax break and the legislature ought to look to see if it is being abused or being used more than intended or expected. 

She said there is talk of changing the tax break threshold to $100,000, down from $250,000.

Lehner said if the rollback of the tax break occurs she anticipates it would happen in conference committee.

Ohio House Floor Leader Bill Seitz, R-Cincinnati, also supports reducing the tax break.

“I believe that we might have overshot the mark” on the exemption, he said. 

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