Last week, Governor John Kasich introduced the details for his biennial budget for Fiscal Years 2014-2015. In it, there are many proposals that are expected to create spirited debate within the Ohio Legislature over the next few months. Some of the highlights include:
Income tax reform: In Governor Kasich’s proposal, the administration takes the first steps toward a 20% state income tax reduction over the next three years, which equates to Ohioans paying $3.1 billion dollars less in their returns filed in 2014 and 2015. State income tax rates would also start to drop in September 2013. For example, those with a gross income between $40,000 and $80,000 would see their rate drop from 4.109% to 3.287% over the next three years. Additionally, most small business owners would receive a 50% tax cut up to $750,000 in net income for those who pay state income tax. This equates to another $1.2 billion in state income tax cuts over two years.
Sales tax expansion: Under the Governor’s proposal, many more services would be subject to sales tax, including legal and advertising services, cable TV, haircuts, dating services, and coin-operated laundries. Essentially any service not specifically exempted (i.e., charities and school organizations, rental, and health services), would be subject to the state sales tax. That being said, the overall state sales tax rate would lower to 5% from 5.5%.
Tax refund: Ohio’s “rainy day” fund is expected to grow to the point where it will trigger an automatic reduction. This will result in Ohioans receiving a one-time state income tax refund of 4%, or $400 million total, in 2014.
Expansion of Medicaid: In concordance with the federal health care exchange program, an additional 275,000 Ohioans will receive health-care coverage.
Education reform: Adds an additional $1.3 billion dollars for primary and secondary education as part of the Governor’s Ohio Achievement Everywhere Plan and guarantees no school district will receive less money.