Analysis: Business tax cuts in Senate budget would overwhelmingly benefit the big boys

By: - June 23, 2023 4:45 am

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In announcing a draft state budget last week, Ohio Senate President Matt Huffman, R-Lima, said the plan puts $3.1 billion back in the hands of families and small businesses.” 

Huffman didn’t mention the state’s big businesses, but that’s who will get the lion’s share of the business cuts in a state where business taxes already are low, according to an analysis by Policy Matters Ohio. It concluded that 17% of Ohio companies would receive more than 60% of the total benefit.

Ohio businesses are taxed under the state’s commercial activity tax and small businesses already pay little or nothing under it. Those with less than $150,000 in annual revenue are exempt, while those bringing in between $150,000 and $1 million a year pay a flat $150.

Under the Senate proposal, the tax would be eliminated over the next two years for all businesses with less than $6 million in annual receipts. Businesses bigger than that would be exempt from the commercial activity tax on their first $6 million in income.

The cuts are projected to deprive the state of $500 million in annual tax revenue.

According to the Policy Matters analysis, two-thirds of all businesses that would see their taxes completely eliminated — the roughly 100,000 with revenue between $150,000 and $6 million — would save $150 a year and together receive about $190 million of the cut’s cumulative annual benefit.

Meanwhile, the 17,000 companies that bring in more than $6 million a year would each save $18,200 a year and together would receive more than three-fifths of the total cut, the analysis said.

“While the ultimate Senate (commercial activity tax) reduction is not as heavily weighted in favor of Ohio’s biggest companies as the original Senate proposal, it still provides most of the cut to a small share of state businesses — the state’s bigger businesses,” Policy Matters Research Director Zach Schiller said in a written statement.

In the analysis, Schiller cited a report by Ernst & Young saying that in terms of effective tax rates on businesses, Ohio already ranks among the lowest states in the country.

Embedded in that low rate are previous cuts undertaken by earlier legislatures. One is the tax cut for limited liability corporations created in 2013. It costs taxpayers about $1 billion a year and is yet to deliver on promises that it would create jobs. 

In addition, since 2015 Ohio has diverted more than $1 billion in what had been revenue from the state liquor monopoly into JobsOhio, an agency whose highly paid employees are supposed to be creating and protecting jobs. The agency uses the money to pay salaries, market the state and provide incentives for businesses to locate, expand, or stay here.

Even so, U.S. News & World Report ranked the Buckeye State ninth worst when it comes to unemployment rate, job growth and labor force participation in 2021.

In his press release touting the state’s latest tax cut proposals, Huffman implied that slashing business and income taxes doesn’t have to be paid for by somebody else or translate into cuts to state programs.

“We should always remember that moms and dads go to work to feed their family, and their priority should never be to feed the government,” he said in the statement announcing the cuts.

However, the money to pay for the cuts should go instead to state programs families depend on, Schiller said.

“The half-billion dollars a year that this tax cut will cost would be better spent educating our kids, bolstering our public health system, paying our care workers better, and aiding local governments and libraries,” he said.


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Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.