COLUMBUS — Ohio lobbyists and lawyers apparently aren’t going to lose their state income tax cuts after all.
House members voted 90-0 Thursday to strike a portion of the state budget approved in July that removed members of those two professions from getting small-business tax cuts.
House Speaker Larry Householder said the budget measure is “impossible to enforce” because state tax forms don’t require the listing of occupations.
Householder, R-Glenford, who pushed to remove the $25 million annual tax break for lawyers and lobbyists, said he is “grudgingly” giving in. Lawmakers will revisit entire business tax break in the next budget, due in two years.
Lawmakers then will have more information because the bill instructs taxation officials to add a listing for taxpayers’ occupations to tax forms, the speaker said.
The $1 billion-plus annual tax break for small business owners was a major sticking point in the late-to-arrive state budget. Householder and the House wanted to nearly halve it, arguing it yielded more profit for business owners instead of creating jobs, while the Senate and Republican Gov. Mike DeWine fought to save it. Yanking it from lawyers and lobbyists was one of the concessions to reach a state budget agreement.
Zach Schiller, research director for liberal-leaning Ohio Policy Matters, said in a statement: “The LLC loophole hasn’t led to an increase in the growth of new businesses or first-time hiring by new businesses, compared to the nation. Ohio’s share of small businesses has continued to dwindle and our overall economic performance remains subpar. In short, this tax break doesn’t work.”
In another unexpected move, the bill was amended to repeal the sales tax on feminine hygiene products (dubbed the “tampon tax” or “pink tax”) at a cost to state coffers of $4 million a year, and prescription adult diapers for Medicaid patients at a cost of $1 million a year.
Bills to repeal the sales tax on feminine hygiene products have surfaced regularly in the legislature for years, but never gained traction. Rep. Niraj Antani, R-Miamisburg, was among several lawmakers who sought to eliminate the tax, which he called “unfair and discriminatory.”
The bill now advances to the Senate for consideration.
The surprise developments were added to an existing bill to provide a modest tax cut for Ohio teachers.
Senate Bill 26, sponsored by Sen. Stephanie Kunze, R-Hilliard, would allow educators to deduct up to $250 annually on their state income tax forms for unreimbursed expenses for classroom supplies and professional development.
The tax cut, however, is far from sizeable. The average educator would save $12 or less a year, according to the Legislative Service Commission.
Teachers already are entitled to a $250 deduction for such expenses from their federal income taxes, so the state tax break would apply to the next $250 in out-of-pocket spending.
The tax break, beginning with 2020 state tax returns filed in 2021, would reduce state revenues by $600,000 to $1.1 million a year, state officials estimate.
Expenses that could be deducted by teachers include books, supplies, computer equipment and software.
Becky Higgins, president of the Ohio Education Association, told lawmakers that a federal survey last year found that 94% of teachers dig into their own pockets for about $500 a year to help educate their pupils.
“Studies show that teachers are spending more of their own funds each year to provide supplies for their classrooms and purchase essential items such as books, pencils and scissors,” she said.