Testa was at the Butler County Public Safety Education Complex in Liberty Twp. organized by the Chamber of Commerce Serving Middletown, Monroe and Trenton. He spoke to the audience of about 10 about the new two-year budget and why this budget is better for small businesses as opposed to past budgets which gave more tax support for larger businesses.
“We want to help to try incentivize smaller businesses, pass through entities as they create most of the new jobs in the private sector and it’s an area that had been under-recognized in the past,” he said.
Gov. John Kasich signed at the end of June a new biennium budget that includes $1.9 billion in tax cuts, which a sizable portion is dedicated to saving small business owners in tax dollars.
Small business owners would not have to pay taxes on the first $250,000 of their business income, and after that a flat tax of 3 percent would be applied. But small business owners in 2017 will then be able to deduct 100 percent, up to $250,000, of their net business income off their adjusted gross personal income on their Ohio personal income tax form. That amount currently is 75 percent.
The state also reduced the tax rate for withholdings, which will help employees of small businesses, said Testa.
“They’ll see the big impact of it next spring when they file their income tax return, they’ll get a larger refund,” Testa said. “Businesses (are) the same way.”
But employees should see a small increase in their weekly or bi-weekly checks, Testa said, when companies receive the new withholding tax rate tables next month.
While Kasich and GOP lawmakers support the $131 billion spending budget —which more than half will come from the state’s general revenue fund — Ohio Democrats say this budget is bad for the state.
"In the most recent budget, Kasich line-item vetoed nearly $100 million for 120 school districts across the state. Local governments have been slashed to the bone," said Ohio Democratic Party Chairman David Pepper.
He said the state’s “devastating cuts,” most notably the local government funds in Kasich’s first biennium budget in 2011, are continuing to hurt Ohio.
“These devastating cuts are a big reason why Ohio has failed to rebound from the Great Recession as quickly as many other states — and they’re definitely a reason why many Ohioans have seen their local tax bill go up,” Pepper said.
Testa said from 2011 to 2014, the state cut an estimated $3 billion in taxes, which included cutting income taxes by 10 percent. He said math will dictate that people in higher tax brackets will receive larger cuts, but “to find some balance” the also incorporated the state-level earned income credit.
But unlike the refundable federal earned income credit, the state credit can only be used to “reduce your tax liability to zero, never in the negative.”
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