By Terry Fleming // TC Fleming & Associates
The Ohio General Assembly is getting closer to finishing their work before the much-needed summer recess. The state operating budget is their main priority as the Ohio Constitution requires a balanced budget be signed into law every two years by July 1st.
Governor Mike DeWine’s proposed budget was introduced in the House in early February. The Ohio House of Representatives, led by Chairman Jay Edwards, made changes to the Governor’s budget, and passed their version with a bi-partisan vote of 78-19 on April 26th. The Ohio Senate Finance Committee made changes to the legislation and favorably reported out of committee. The full chamber favorably passed the legislation on June 15th. The DeWine Administration, House, and Senate leaders now have a few weeks to negotiate a final version.
During his long career in public service, Governor DeWine has been an opponent of tobacco usage, so he included numerous measures in his budget proposal to curb tobacco usage, many of which would negatively impact MIRA membership. The most notable provisions were:
Prohibiting any person from giving away, selling, or otherwise distributing a flavored tobacco product. Selling flavored tobacco products would be grounds for losing local food and tobacco licenses.
Prohibiting an individual under the age of 18 from selling any tobacco product.
The General Assembly holds a less hostile view on tobacco and made several important changes to the Governor’s proposal that benefits MIRA members. The most positive changes include:
The Senate added language prohibiting local regulation of tobacco products and other nicotine products, a huge priority for MIRA, as it would save us time and energy lobbying against local proposals across Ohio.
The Senate also included MIRA supported language to rescind a provision enacted in the prior General Assembly allowing Cuyahoga County to convert 30 cents of its existing 34.5 cent cigarette tax (the portion benefitting its regional arts and cultural district) from a per-pack flat rate to a varying rate based on wholesale cost of the cigarettes. The Senate also repeals the county’s ability to levy a new wholesale tax on vapor products.
The new proposal would allow Cuyahoga County to continue levying a cents-per-pack tax and removes the 30 – cent cap on the amount of tax that can be levied, provided voters approve the increased rate.
The House removed the flavor tobacco ban, but the Senate reinserted language that would prohibit giving away, selling, or otherwise distributing solutions for use in electronic smoking devices that both contain nicotine and have a “characterizing flavor” other than tobacco or menthol.
The House and Senate agreed with the executive proposal prohibiting an individual under 18 from selling tobacco products.
MIRA will be actively lobbying House leadership to support the Senate led changes prohibiting local regulation of tobacco products and repealing the Cuyahoga County tax changes when the two meet during the Conference Committee. While MIRA is not supportive of the Senate agreeing with the administration on banning the sale of flavored tobacco, we may have to accept the language being included in the final version of the bill as an exchange for the other provisions we do favor.
Both the House and Senate agree that Ohioans should receive income tax relief. The House plan would consolidate the number of income tax brackets from 4 to 3, combining the lowest state income bracket (income between $26,050 and $46,100) with the second lowest bracket (income between $46,100 and $92,150) beginning in 2023. The new combined income bracket tax rate would be 2.75%.
The Senate plan would consolidate the number of brackets from 4 to 2; a flat rate of 3.5% for the higher bracket and 2.75% for the lower bracket. A compromise between the two plans is the most likely outcome when the final bill is signed.
MIRA is also supportive of the Senate’s proposal to exclude, for tax periods beginning in 2024, businesses with taxable gross receipts of $3 million or less from the Commercial Activity Tax (CAT). For tax periods beginning in 2025 and thereafter, businesses with taxable gross receipts of $6 million or less would be exempt. The CAT has long been viewed as an unfavorable tax for small retailers, so the Senate proposal to begin phasing out the CAT would be beneficial to MIRA members.
In other state government news, Governor DeWine has appointed Michelle Gilchrest to lead the Ohio Lottery Commission. The former Director was forced to resign due to alleged sexual harassment of staff members. Gilchrest has a long history in State Government and should bring competency and stability to the commission.
On a political note, Ohioans will be asked on August 8th to decide whether they want to make it harder to amend the Ohio Constitution. For context, there are several citizen- led groups that would like to legalize recreational marijuana and protect abortion rights. Seeking to block these proposals, the conservative legislature passed a ballot resolution, which if passed, would require a 60% affirmative threshold to be met for a ballot initiative to pass. There’s not been any public polling conducted, so the only prediction that can be made now is that a lot of money will be spent!