The stopgap budget legislators passed after missing the original budget deadline runs out on July 17. As that deadline rapidly approaches, all indications show progress is being made in negotiations, and lawmakers should pass a fiscal plan by the Wednesday deadline.
The controversial nuclear bailout bill, House Bill 6, has played a role in the budget stalemate. While views on the bailout have been a source of contention for lawmakers, it should not get in the way of good tax policy that would provide tax relief to hardworking Ohioans.
But will it be a good plan for taxpayers?
These are the policies of concern that Ohio taxpayers should want fixed before a budget deal is struck.
Tax Cuts
After a significant gas tax increase went into effect earlier this month, providing tax relief in the new budget is more important now than ever. The House budget plan would eliminate state income tax for those making below $22,250. For everyone else, there would be a flat 6.6 reduction in individual income tax rates. This would save taxpayers an estimated $100 million, but the Senate plan went even further in providing relief.
The Senate’s proposal would eliminate state tax for income less than $21,750, and cut individual rates by 4 percent in 2020, and another 4 percent in 2021. Taxpayers would save a whopping $300 million under their spending plan.
While individuals deserve tax relief, so do businesses. That’s why it was disappointing to see the House’s budget proposal make changes to small-business tax deductions and also remove a 3% cap on their tax rate for income over $250,000. According to the National Federation of Independent Businesses, this misguided policy would cost Ohio businesses over $1 billion.
Ridesharing Taxes
Both the Senate and House proposed bills to expand the state’s sales tax on e-commerce companies, such as Uber and Lyft.
The House include language in their budget which would “clarify” that transportation network companies such as Uber and Lyft are required to pay the state’s 5.75% sales tax. The Senate went even further and passed a far-reaching change in the definition of a vendor that must collect sales tax on top of language that could open the door to retroactive tax collection – a big problem.
The proposals would hurt consumers the most, costing taxpayers around $16-24 million in 2020. Companies and technology trade associations have warned lawmakers that passing such proposals would be going too far and may result in lawsuits, congressional security, and public outcry.
Occupancy Taxes
The House budget sought to impose an occupancy tax on services fees for online travel agent services. These services, like Expedia, Travelocity, and others – make it easier for people to book hotels or other accommodations online. They attract travelers, which are a boon for restaurants, shops, and other local businesses. If included in the budget, this tax would drive up costs for Ohioans and out-of-state visitors when they use travel booking services.
Ohio legislators are in the final stages of passing a budget that will include some significant tax cuts. The more money returned to taxpayers’ wallets, and the less taken out of those wallets, the better.