Governor Kasich’s Budget Plan – Small Business Impact

First, understand that this is a budget PROPOSAL and not yet legislation. Titled House Bill 59, this proposal is complicated and has a fairly large impact on small business. Whether that impact is positive or negative may still remain to be seen, and it might depend on what type of business you are.

Read the budget proposal online here, but be forewarned that it’s 4,200 pages long. Yes, I said more than four THOUSAND. PAGES. LONG. So in an effort to save you a couple days of incredibly boring reading, here’s the plan in a nutshell as it applies to small business:

* $63 billion proposal
* cuts Ohio state income tax for small businesses by 50%
* cuts Ohio state income tax for individuals by 20%
* cuts Ohio sales tax from 5.5% to 5.0%
* implements sales tax for services

And if you’re interested, the plan also expands Medicaid and reforms school funding.

As the owner of a small business, but a service business specifically, the proposal caught my eye. On the one hand, I would love to see a 50% reduction in the income tax that Michelle Tuesday Music School pays. On the other hand, do I want MTMS customers to pay sales tax on my service? Do I want to pay sales tax on services I receive?

Dig into the details of the proposal and you find that education services, as well as health care, construction, residential leasing, child care and several others are specifically exempt from the service tax. Since MTMS sells music education, our customers won’t be directly affected by the new service sales tax. That’s certainly good for my business, though I still may be impacted by paying sales tax on services MTMS receives.

So Kasich proposes a savings of $63 billion, and he does it by cutting sales and income taxes fairly significantly and expanding Medicaid. He makes up the rest of the revenue through taxes on services and reform of the oil and gas drilling tax.

The Dispatch opposes the plan, arguing that it might hurt small businesses because it’s too complex, and because service businesses, many of them small, will now have to manage sales tax. Not only will their customers have to fork out more money for their services, but the businesses, most of whom don’t have legal or accounting professionals on staff, will now have the added expense and headache of figuring out how to calculate, assess, file, and remit sales taxes. The Dispatch argues that makes Ohio less attractive for businesses, and if businesses leave the state, then we lose out on the anticipated revenue the plan is designed to generate in the first place.

Do you have an opinion?

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