While Republicans are cheering the budget signed by Gov. Mike DeWine, Democrats are frustrated at the expansion of vouchers, the takeover of power from the state board of education, and what they say are tax cuts for the wealthy. And a progressive research group says there’s a provision that will do the opposite of providing tax relief for some Ohioans.
The budget includes $3.1 billion in income tax cuts, from combining Ohio's four tax brackets into two. But it also suspends the indexing of income tax brackets for inflation for two years. Hannah Halbert, executive director of Policy Matters Ohio said that means it creates a tax increase for some people.
“The middle 20% – so that's folks with an average income of about $60,000 – they're going to see on average a $15 tax increase, which is not what we're being promised with this proposal," Halbert said. "People who are kind of working class, $34,000 as an average income for that, that second 20% of Ohioans, they're going to see a $40 increase on average in 2024. So it's not a middle class tax cut."
There's also an exemption in the state's main business tax, the commercial activity tax, and lawmakers say 90% of businesses won't pay the CAT by the end of the budget cycle. The CAT, which taxes businesses on their gross receipts, was instituted in 2005 to replace inventory and corporate franchise taxes. Republicans have proposed getting rid of the CAT before, saying it's uncompetitive and discourages investment.
Business groups say this exemption will help smaller enterprises struggling with inflation and supply chain costs. But Halbert said most of the benefit of that exemption will go to big businesses with more than $6 million in annual receipts, since most businesses with less than $1 million in receipts pay almost nothing in commercial activity taxes.
"There's going to be very, very big businesses getting tens of thousand dollars in tax breaks because of this [exemption] on that first $6 million. And then there's going to be some businesses who are right at that threshold whose tax bill might be like a dollar or $5," Halbert said. "It's going to cost more for the state probably to administer that and collect that than it is for them to pay it. It really is unneeded."
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