New legislation in the Ohio Senate seeks to correct an unintentional quirk in a recently passed tax relief plan that would actually trigger a one-year tax increase for many small businesses and self-employed workers.
Here’s the issue: Earlier this year, lawmakers passed a two-year state budget that, for small businesses, replaces Ohio’s progressive income-tax scale with a flat 3-percent rate.
Starting next year, businesses will be able to deduct all of their first $250,000 of business income before calculating taxes. The problem is, this year they can only deduct 75 percent of their first $250,000 in income.
As Northeast Ohio Media Group’s Rich Exner discovered, that means a self-employed person making $60,000 a year would have paid $113 in state income taxes this past April, but he or she will pay about $450 this tax year because the flat 3-percent rate is higher than what they’re paying now.
Senate Bill 208, introduced Thursday by Sen. Bill Beagle, a Dayton-area Republican, would prevent such tax hikes. It specifies that for this year, business income up to $250,000 would still be taxed under the old tax scale.
“I think the complicated language [of the budget tax cut] maybe didn’t come out, I think, in the way we intended it,” Beagle said in an interview.
Beagle said his bill has the support of Senate leadership and that a companion bill will soon be introduced in the Ohio House.
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