Ohio Statehouse Update
Ohio Chamber enlists Ernst & Young study to demonstrate opposition to tax proposal
The House Ways and Means Committee heard from Ernst & Young (EY) this week regarding a study commissioned by the Ohio Chamber of Commerce and the Coalition of Ohio Metro Chambers of Commerce regarding an analysis of the governor’s tax proposal in the budget. The focus of the EY analysis is on certain tax provisions and their impact on businesses and individuals, including: personal income tax changes, the commercial activity tax (CAT), and general retail sales tax.
In their testimony, EY summarized the following as the key findings of their analysis:
Increases to the CAT on gross receipts have the potential to “magnify economic distortions” caused by tax pyramiding.
Extension of the sales tax to household services makes the operation of the tax more of a consumption tax, but inclusion of business services results in tax pyramiding.
Complete exemption of pass-through income from entities with $2 million or less in receipts results in high marginal rates on additional revenue earned by entities just over the $2 million threshold.
The use of receipts test for pass-through exemption may result in “significantly different effective tax rates” for owners of companies with similar profits but different amounts of receipts.
Individual income tax cuts benefit households at all income levels; the exemption increase benefits households with income below $80,000.
On balance, seniors still receive an overall reduction in taxes due to lower rates when combined with the reduction in senior tax credits and deductions on certain types of income.
Dan Navin, Assistant Vice President of Tax & Economic Policy for the Ohio Chamber of Commerce (Chamber) testified before the committee on March 11. Saying his membership includes all types and sizes of businesses in the state, Navin told the committee that the Chamber opposes the proposal despite the provisions that benefit small businesses. Navin said that the administration’s executive budget moves the state’s tax structure in the direction of providing economic benefits to small business and individual taxpayers that must be paid for by higher taxes on larger businesses.
Navin went on to tell the committee that the Chamber was in opposition to the governor’s proposal to increase the CAT from .28 percent to .32 percent, saying the rate must remain low and apply broadly in order for it to remain palatable for business. Regarding the governor’s proposal to expand the state sales tax base, he said the proposal would include a multitude of business to business services that would greatly increase the cost of doing business in the state. Arguing that business and professional services should not be thought of as a tax on final consumption, Navin said the expansion would result in tax pyramiding.
The discussion on the governor’s tax proposal will now move back to the House Finance Committee. Amendments to the budget are due by March 27, and a substitute version of the legislation will be unveiled the week of April 13. A link to the more detailed analysis by EY can be found on The Ohio House of Representatives' website.
Workers’ comp bill passes House without drama
House Bill 52, the biennial budget for the Bureau of Workers’ Compensation (BWC), passed the House unanimously this week. The $552.4 million budget is a four percent decrease compared to the appropriation for the previous biennium, a savings of more than $23 million.
Among the provisions included, the bill would do the following:
Exempt volunteer corporate officers who work for a nonprofit corporation from coverage under Ohio’s Workers’ Compensation Law.
Allow for a mentally or physically incapacitated dependent to continue receiving workers’ compensation death benefits while employed in a sheltered workshop if the dependent earns $2,000 or less in a calendar year.
Allow a self-insuring employer to furnish rehabilitation services directly to injured employees without prior approval from BWC.
Add to the notice that the administrator must provide to an employer, upon appeal of an Industrial Commission order, that the results of the appeal may result in a recovery against an employer who is a noncomplying employer.
The bill now moves to the Senate for consideration.
Bill to curb algae in Lake Erie receives House approval
House Bill 61, legislation to generally prohibit the application of manure or fertilizer on frozen ground in the western Lake Erie basin was approved this week. Nutrient management has been a topic of multiple pieces of legislation in recent years due to the prevalence of algae blooms on Ohio’s lakes.
Ohio Department of Agriculture Director Dave Daniels testified in support of the legislation, saying “One of the most effective methods of mitigating agricultural runoff is to incorporate applied nutrients into the soil. A key tenant of responsible nutrient stewardship is applying manure and fertilizer at the right time and we know that applying nutrients when the soil is frozen, or snow covered, or saturated by rain, is the wrong time.”
Daniels said that the department has been busy implementing provisions of Senate Bill 150, which required the creation of a fertilizer applicator certification program, the first of its kind in the country to train and certify farmers on proper fertilizer application efforts. To date, the department has certified more than 2,500 farmers on the principles of the 4R Nutrient Stewardship program.
The bill now goes to the Senate for consideration.
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