Ohio state lawmakers are on the verge of negotiating final, two-year budget legislation, after the Senate and House both passed competing budget bills. The great news is that both chambers want to reduce taxes.
The House proposed an income tax cut that would put over $100 million back in taxpayers’ pockets. The Senate bill does them one better, with further reductions in income taxes adding up to over $300 million in tax savings just in year one. More money in taxpayers’ pockets is always a good thing, but it is especially important in Ohio after a significant gas tax increase was enacted in the transportation budget earlier this year.
Estimated to bring in $830 million in year one, Ohio’s new gas tax will take effect July 1, likely right after the general budget legislation is passed. So legislators must pass as much tax relief as possible in the general budget to make up for the gas tax increase, lest constituents get slapped with a big bill.
They ought to start by removing some of the costly and misguided tax policies included in current budget proposals. For instance, the House budget makes changes to small-business tax deductions and also removes a 3% cap on their tax rate for income over $250,000. This would cost Ohio businesses and entrepreneurs over $1 billion in the end, according to the National Federation of Independent Businesses.
The House also hikes taxes on booking travel, imposing occupancy tax on service fees for online travel agent services such as Expedia, Travelocity, and others. Though for some (possibly crony) reason, the big hotel companies themselves are exempted.
This is an unnecessary tax hike, as these platforms already collect tax on the cost of a room. The House would be adding tax to service fees on top of what is already being paid. The result would hurt restaurants, shops, and local businesses by driving up costs for visitors – and Ohioans traveling within their home state.
In both plans, internet sales tax language requiring online marketplaces to collect and remit sales taxes will, perhaps unintentionally, ensnare ride-sharing. This means Ohioans will pay more for their next Lyft or Uber ride — all thanks to the sales tax.
This is a form of double taxation. Ride-sharing drivers are already paying income tax on their earnings, and now they will have to deal with sales tax too. This burden will only make life tougher for drivers and make traveling more expensive for consumers.
The budget also includes a misguided tax hike on vaping. E-cigarettes and vapor products are at least 95% less harmful than traditional combustible cigarettes. Driving up their costs keeps people smoking cigarettes and also risks shuttering small businesses in vape shops.
While removing these policies will help, the big relief is in income tax cuts. Legislators should push the Senate’s proposal, which offers more than $200 million in added savings compared to the House. Aside from tax policy, the Ohio Senate budget also includes a Trump-style regulatory reform rule that would require two regulations be trimmed for any one new regulation that is introduced.
This would be a big win, since Ohio ranked behind only New York and Illinois in number of regulations on the books out of 37 states analyzed by the libertarian-leaning Mercatus Center. A 2015 Pacific Research Institute analysis of the best state regulatory environments for small business shows Ohio at a mediocre 27th, while neighboring Illinois ranked far better.
School choice is also a winner in the Senate plan, with millions in additional support for school choice programs. More families in Ohio will have the chance to control where their children go to school, giving them a shot at a brighter future.
So it’s clear if Ohio legislators build off of the state Senate’s tax cuts and make some improvements, this budget will be a huge win for taxpayers.
Grover Norquist is the president of Americans for Tax Reform, a nonprofit group founded in 1985 to advocate for lower taxes and limited government.
