Ohio Budget Preview: Taxation


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Despite a looming budget deficit, Republican legislators and the Governor-elect have vowed to balance the budget without tax increases. Further, they have announced interest in expanding certain tax breaks and eliminating other taxes entirely. Tomorrow, look for legislation to repeal the estate tax, a proposal that would increase the budget deficit by $120 million over the biennium, and cost municipalities $540 million over the same period.

Speaker Batchelder has also indicated that priority legislation would offer tax credits for hiring the unemployed, occupying vacant buildings, and for recent college graduates to stay in Ohio. John Kasich has expressed interest in eliminating the state income tax, but later backed away from this proposal and has refused to give a timetable. However, the Governor-elect has told reporters that he may be interested in retroactively restoring the income tax cut that was due in 2009 and 2010 but delayed until 2011.

A small but interesting provision included in the last two biennial budget was a temporary measure to reduce the amount of credit that fuel distributors and retailers receive for collecting and remitting the Ohio motor fuel tax. In the past, the credit was 3 percent, but the last two budget bills reduced the amount to 1 percent, with the proceeds going to fund the Highway Patrol. If the temporary law is allowed to expire and is not included in the budget, it will amount to a tax break for petroleum dealers at the expense of either transportation or public safety.

Other things to watch for, hinted at by incoming tax commissioner Joe Testa:

  • Changes to municipal income tax structure
  • Reform of tax increment financing used by local governments to pay for infrastructure in support of economic development
  • Reduction of the backlog of property tax cases pending at the Board of Tax Appeals, which saw its funding cut in 2009.
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