Budget house

House passes income tax cut and school funding overhaul

COLUMBUS — Lawmakers in the GOP-controlled Ohio House of Representatives passed a 2% income tax cut and a nearly $2 billion school funding overhaul in their version of the budget of the state over two years.

The fate of this new school funding formula, which would be phased in over six years, is murky. Senate Speaker Matt Huffman, R-Lima, said he doesn’t like the priceand the GOP-controlled Senate is working on its own way to pay for schools.

Even with increased spending, nearly 100 school districts would lose state aid over the six-year period. Lawmakers added $115 million Tuesday afternoon to ensure no district loses money in the first few years, said Rep. Scott Oelslager, R-North Canton, who heads the finance committee of bedroom.

After:See what your school district would get from the Ohio House budget plan

House lawmakers passed the $74.7 billion two-year budget in a 70-27 vote Wednesday.

Defend the tax cut

Another key change — a 2% across-the-board income tax cut — could violate a ban on states offering tax cuts if they receive federal stimulus funds. Ohio Attorney General Dave Yost, a Republican, challenge this provision in courtbut the matter was not resolved.

House Speaker Bob Cupp, R-Lima, said House Republicans want to include the cup anyway.

“Budgeting is a multi-step process and so we wanted to make it our priority,” Cupp said. “We will receive more guidance as the process progresses and adjust accordingly.”

Democrats are skeptical that the tax cut does much to help average Ohio. Only those earning $200,000 or more would save more than $100 per year, according to an analysis by the Institute on Taxation & Economic Policy for the liberal think tank Policy Matters Ohio.

According to the analysis, three-fifths of state income tax filers — who earn less than $61,000 a year — would get 7% of the total tax cut.

Still, Oelslager said the change was about philosophy: “We philosophically believe that individuals work hard to earn those dollars and they deserve to stay in their pockets.”

The budget also includes a new tax deduction for taxpayers with capital gains from the sale of an interest in an Ohio-based business. Taxpayers who invested at least $1 million in a business headquartered in Ohio for at least five years would be eligible for the deduction, which would begin in 2026.

Another new income tax deduction would allow investors in Ohio-based venture capital firms to deduct all or part of capital gains beginning in 2026. Companies must be certified by the state.

Elimination of Penalties for COVID-19 Violations

Another change would also eliminate fines and penalties restaurants and bars faced for violating state COVID-19 protocols. Businesses that have lost their liquor license due to violations can have it reinstated after paying a $2,500 fine.

If approved, the change would be the latest effort by Republican lawmakers to curb Governor Mike DeWine’s power and influence health department.

“The idea is that we need to help these businesses get back on their feet, and this will be one way to do that,” Cupp said of the change.

The House withdrew several DeWine proposals, including one $50 million ad campaign for Ohio, harsher penalties for armed offenders and the power to close retirement homes deemed unsafe.

Lawmakers also cut $2 million to address the social determinants of health and improve health equity for Ohioans. Democrats tried unsuccessfully to restore that money and add $100 million for public health.

“We are facing a public health crisis,” said Rep. Erica Crawley, D-Columbus. “But even before we enter the pandemic, we already know that we have negative health outcomes for black and brown communities and for people in rural Ohio. The pandemic has only done exacerbate these negative health outcomes.”

Lawmakers also cut $72 million over two years from H2Ohio, the governor’s plan to improve statewide water quality and reduce harmful algae blooms. Rep. Paula Hicks-Hudson, D-Toledo, attempted to return that money, but her efforts were denied.

Other changes included:

  • Allow parents to withdraw their child from standardized national tests, such as the SAT or ACT, starting in July 2022.
  • Prohibit to park districts in Lake and Mahoning counties use of eminent domain for bike paths and trails.
  • Allow the sale of alcohol at bingo games.
  • Reinstatement of a sales tax exemption on bullion and bullion coins.
  • Removed language proposed by DeWine to clarify that any legally married couple, including LGBTQ people in Ohio, can adopt. Even without the language, couples can still adopt in Ohio. “In terms of the ability to adopt, I don’t think there’s any impact,” Oelslager said of the change. “It’s just a change in semantics between what the governor has proposed and what we put in this bill.”

Several Democratic proposals were defeated, including:

  • Added $200 million for rent and utility assistance.
  • Increase funds for the Ohio Consumers’ Counsel, which represents consumers in utility matters.
  • Temporarily increase the funds of the local government fund and the public library fund to compensate for the losses due to the income tax reduction.
  • Repealing a law that prevents Planned Parenthood from receiving public funds and cutting $6 million for crisis pregnancy centers that oppose abortions.

The budget heads to the Ohio Senate, where more changes are expected. Lawmakers are required to pass a balanced budget by June 30.