About 80 percent of Ohio’s small-business owners potentially affected by Gov. John Kasich’s proposal to slash income taxes would save $400 or less per year, according to figures from the Ohio Department of Taxation.
The amount has some calling into question the Republican governor’s expectation that the money saved by Ohio entrepreneurs would be enough to spur job creation.
For weeks, Kasich has touted the 50 percent small-business income tax cut — a cornerstone of his “Ohio’s Jobs Budget 2.0” — as a plan to free up capital for small-business owners, prompting investment, expansion and hiring.
“This is $1.9 billion injected into the economy over three years,” said Rob Nichols, a spokesman for Kasich. “You can bet it’s going to be a shot of adrenaline for the state.”
But for most small-business owners, like Mary Costanzo, owner of Revelations Salon & Spa in Lakewood, the individual tax savings would be a trifle, not a treasure.
Revelations, with 32 employees, has a net income of about $35,000 each year, Costanzo said. Kasich’s tax cut would lead to a savings of about $650.
“Honestly, the cut is not going to do anything for me,” Costanzo said, adding that with Kasich’s proposal to begin taxing services like hair cuts, Revelations may ultimately take a hit.
Costanzo anticipates her salon, which is slated for $1 million in sales this year, will see about a 16 percent drop in visits if the sales tax base is expanded. Kasich has proposed lowering the 5.5 percent state sales tax to 5 percent, but applying it to a broad range of services.
“I think it’s good for the state but, for my business, I think it might hurt it,” Costanzo said.
James Ingalls, Costanzo’s husband and a self-employed attorney, also is unlikely to see his coffers lined under the plan.
Ingalls’ net income varies each year from about $20,000 to $70,000 depending on case loads, Costanzo said. He would save, at best, about $1,600 each year, and his services would become taxable under the plan.
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The savings, nearly four times what most small-business owners in Ohio would reap, would not be enough to grow Ingalls’ business, Costanzo said.
The entrepreneurial couple also owns a small real estate holding company they say would not be positively affected by Kasich’s plan.
Nearly 575,000 small-business owners who report company income on their personal taxes, and therefore qualify for the proposed cut, have net income after payroll of just $25,000 per year or less, according to the Ohio Department of Taxation. The highest earners in that bracket would save $400 per year beginning in 2015 if lawmakers pass Kasich’s plan to cut small-business taxes in half and reduce income taxes in all brackets by 20 percent.
Economist Michael Mazerov with the liberal Center on Budget and Policy Priorities in Washington, D.C., says the proposed cuts will not be a boon to job creation.
“The amount of money the vast majority of people will get is so small that even if they wanted to expand, they wouldn’t have the flow,” Mazerov said. “Even at the maximum level, the savings is enough to hire someone at a poverty-level wage.”
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