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Finance chair says income tax cut is likely in Ohio House Republicans' budget proposal

Ohio House Finance Committee OBM presentation
Karen Kasler
/
Statehouse News Bureau
Ohio's Office of Budget and Management Director Kim Murnieks takes questions during her presentation of Gov. Mike DeWine's budget during the House Finance Committee's first hearing on it on February 6, 2023.

State lawmakers are on spring break, but when they return they’ll need to start moving the two-year state budget, which needs to pass both chambers and be signed into law by the end of June. One question they’ll have to answer is how to spend the $6 billion in surplus cash in the state’s general revenue fund.

The budget is still in the House finance committee, and chair Jay Edwards (R-Nelsonville) said though an income tax cut wasn’t in Gov. Mike DeWine’s initial budget proposal, Republicans in his chamber still want one.

“I think that you're going to see the will of our caucus to want to have some sort of cut in there, but how deep that is, we'll see," Edwards said.

But Edwards admitted there are a lot of proposals and programs that are likely to angle for a share of that surplus.

“I think everything's in competition with each other right now. If you sit in these budget committees, we've been going from about nine to five or nine to six every day," Edwards said. "We have a lot of worthy causes out there.”

DeWine’s budget includes the elimination of taxes on baby products and continued money for a school funding plan begun last budget, as well as a $2.5 billion fund to prepare large sites for economic development.

Edwards said the billion dollar rural highway fund in the House version of the transportation budget that was stripped out by the Senate may also be discussed. House Speaker Jason Stephens (R-Kitts Hill) strongly supported that fund, but Senate President Matt Huffman (R-Lima) said such a proposal was a problem in the transportation budget, since it used general revenue fund dollars and not gas tax revenue.

"If the speaker wants this to be a priority with general revenue fund dollars in the House, they can. That's certainly up for the House to move forward on that. But I've also heard from various House members that they want an income tax cut," Huffman said after the transportation budget passed. "My argument was this is better had during the operating budget because it's general revenue fund money that's going to come from those other projects."

A bill to create a flat tax of 2.75% and make changes in property taxes to fund that cut is the top priority of House Speaker Jason Stephens (R-Kitts Hill). But there's been widespread opposition because of the loss of funding to schools and local governments, and lawmakers' researchers have suggested it could mean a property tax increase of nearly a billion dollars for homeowners and agricultural property owners. But with many Republicans supporting a flat tax, it could end up as part of the budget, or lawmakers may add in another tax cut proposal entirely.

Income tax cuts have been a feature of Ohio's two-year state budgets since 2005, though a tax cut was delayed in 2009 because of the recession. Supporters have said tax cuts encourage private sector investment and allow Ohio to compete with other states with lower or no income tax. But opponents have said income tax cuts benefit wealthy Ohioans more than those who need them, and there's no evidence they lead to increased economic development.

Amendments to the House budget are expected this week, so work can begin on the budget after lawmakers return from spring break the week of April 17.

Contact Karen at 614-578-6375 or at kkasler@statehousenews.org.