Governor Kasich set forth his plan to take Ohio to greater heights when he presented his fiscal year 2016-17 budget proposal. The key tax elements of his plan are:
Tax Cuts:
- 23% across-the-board reduction in tax rates (the highest rate of 5.33% will drop to 4.1%)
- Small business owners, including pass-through entities (PTE’s), will pay no income tax on business income when the gross receipts are less than $2M
- The existing 50% deduction on income up to $250,000 for other businesses (including PTE’s) would be made permanent (thus, the 75% reduction for 2014 becomes temporary)
- Businesses with less than $2M of gross receipts will pay only $150 in commercial activity tax (CAT)
- Increase personal exemption for those making less than $40,000 from $2,400 to $4,000 and from $1,950 to $2,850 for those with incomes between $40,000 and $80,000
Tax Increases:
- CAT rate will rise from .26% to .32%
- Sales/use tax rate increases from 5.75% to 6.25%; county and transit sales tax, if applicable, will be on top of this base rate
- Broadening of the sales tax base to include:
- Management consulting, including consulting by CPA firms
- Lobbying
- Parking services
- Cable subscriptions
- Debt collection services
- Public relations
- Market research/opinion poling
- Oil & gas severance tax increase from 6.5% at the wellhead, 4.5% for sales downstream
- Means testing tax credits and exemptions for retired taxpayers earning over $100,000
- Sales tax vendor discount capped at $1,000 per month
As the Governor’s budget makes its way through the legislative process, some of the provisions above will not survive and others will likely be modified. We will track the bill as it moves through both houses and report significant changes impacting your business or personal tax situation.
In the meantime if you have any questions about how the proposals affect you or your business, please contact us here.
For more information about tax planning in Ohio, check out one of our other recent blog posts:
Ohio Department of Taxation Implements Identity Theft Safeguards That May Delay 2015 Refunds
