News and Analysis
The bill makes a variety of changes to the state’s tax system including cutting personal income taxes, reducing the number of personal income tax brackets, centralizing municipal business tax collections, and expanding the base and increasing the rate of the sales tax.
The OMA testimony highlighted support for centralizing municipal tax collections and reducing the income tax and brackets, but cautioned against increasing the sales tax rate in order to offset personal income tax reductions.
The bill is scheduled to be voted out of the House in mid-April. 3/23/2017
This week the OMA submitted testimony to the House Ways and Means Committee in support of a specific proposal in the governor’s budget (HB 49) that would streamline and centralize the administration of net business tax.
Ohio has one of the country’s most administratively burdensome taxing structures, mostly attributable to Ohio’s local income tax system. Ohio is one of a handful of states that taxes both individuals and businesses at the local level and the only state in which each municipal corporation makes its own rules and regulations.
The administrative costs of the system put Ohio at a disadvantage compared to its peer states and diverts Ohio manufacturers’ resources from productive activity. The proposal seeks to minimize compliance costs associated with filing in multiple jurisdictions.
The governor’s proposal to centralize collection and administration for business filers would significantly reduce the time and cost associated with multiple net profit return filings. 3/9/2017
Here’s a peek at the House Ways and Means Committee hearing schedule to deal with HB 49, the state’s biennial budget. 3/2/2017
In a recent post, OMA Connections Partner, RSM US, updates us about the federal tax reform proposal known as the Blueprint:
“The Republican leadership of the House of Representatives, and the leadership of the Ways and Means Committee, have advanced an innovative tax reform proposal that is commonly referred to as the Blueprint. As expected of nearly all income tax reform proposals, it would reduce individual income tax rates and the number of tax brackets, paying for those rate reductions with a broadening of the tax base. For example, the Blueprint would reduce the top individual income tax rate from 39.6 percent to 33 percent, eliminate the alternative minimum tax, and eliminate most individual, non-business deductions, other than those for mortgage interest and charitable donations. It does not appear that the existing social security tax on earnings above the “wage base” of approximately $120,000 would be affected. The Blueprint’s most important innovation, however, is its novel approach to the taxation of business and investment income, described more fully here.” 3/2/2017
The Sixth Circuit recently ruled that Roth IRAs that purchase shares of a Domestic International Sales Corporation (DISC) and have dividends returned to it cannot have those transactions recharacterized as excess contributions by the IRS. This is a significant win for taxpayers.
Read more about this case from OMA Connections Partner, MCM CPAs & Advisors. 2/22/2017
This week Ohio Department of Taxation Commissioner Joe Testa, House Finance Committee Chairman Ryan Smith and House Ways and Means Committee Chairman Tim Schaffer met with the OMA Tax Committee to discuss HB 49, the state operating budget, and more specifically, the tax proposals in the budget.
The governor’s budget proposal is focused on driving down the income tax. The reduction in income tax would be paid for through a variety of other tax increases including the sales tax, cigarette taxes, beer and wine taxes, and a new severance tax.
The budget also proposes centralized collection for business municipal taxes, something the OMA has long advocated.
The budget wrangling must conclude in time for it to be signed into law no later than June 30.
For a front row seat regarding the state’s tax developments, join the OMA Tax Committee at My OMA, select My Communities. 2/16/2017
Governor Kasich’s 2017/18 biennial budget proposes to modernize the municipal tax system by centralizing administration at the state level: “To save businesses the extra cost of computing and then filing “net profit” taxes with multiple municipalities, Ohio seeks to streamline the process by having businesses file just one form and a single payment online through the Ohio Business Gateway, with the Ohio Department of Taxation processing payments and distributing revenues back to the appropriate local government, just as it does for county sales taxes and school district income taxes.”
In a memo of support to the administration, OMA wrote: “This will relieve the current complicated and burdensome system of municipal income tax collection for businesses. It would be one more important step in advancing Ohio’s business-friendliness. The OMA supports the governor’s proposal to centralize municipal income tax collection administration.” 2/9/2017
Governor Kasich is going after additional income tax reductions in his last biennial budget.
He proposed a nearly $3.2 billion, 17% cut in income taxes over the two years beginning July 1. The number of income tax brackets would be reduced from nine to five. The top tax rate would drop to 4.33%.
The budget would increase personal income tax exemptions for those earning less than $80,000. The administration said these changes would mean an additional 350,000 low-income Ohioans will pay no income tax.
Personal income taxes have been reduced in Ohio by 30% since 2005. 1/30/2017
Governor Kasich would pay for his proposed personal income tax decrease with a concomitant increase in sales and other taxes.
The increases in the sales and other taxes would total about $3.1 million. The sales tax rate would increase by 1/2% to 6.25%.
The sales tax base would expand to additional services such as television subscriptions, elective cosmetic surgery, lobbying, landscape design, interior design and decorating, travel package and tours and repossession services.
The budget proposes to increase the state’s severance tax on oil and gas and raise taxes on cigarettes, beer and wine.
Speaker Cliff Rosenberger stated that he is not keen on any “tax shifting.” 1/30/2017
As every business taxpayer knows, Ohio has an administratively burdensome, and costly, municipal tax system. Governor Kasich proposes to simplify its payment process.
He would streamline the process by having businesses file just one form for municipal taxes and make a single payment through the Ohio Business Gateway. The Ohio Department of Taxation would process payments and distribute revenues back to the appropriate local governments, just as it does for county sales taxes and school district income taxes.
This reform has been advocated by the OMA and its business allies, and opposed by the municipal lobby. 1/30/2017