United States

Ohio: Governor’s Budget Includes Significant Tax Changes

Feb 09, 2015
From KPMG TaxWatch

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Recently, Ohio Governor John Kasich introduced his fiscal year 2016-2017 Executive Budget. The budget contains some significant tax changes, many of which the Governor proposed unsuccessfully in 2013. The Governor proposes to restructure Ohio’s existing tax system so that it relies less on income and more on consumption taxes. On the individual income tax side, the budget would adopt across the board income tax rate cuts of 15 percent in 2015 and 8 percent in 2016. Ultimately, the highest marginal rate (not taking into account municipal income taxes) would be reduced from 5.333 percent to 4.106 percent. Another proposed change intended to provide relief to small business owners would be to eliminate income taxes for businesses and pass-throughs with gross receipts of $2 million or less.

The Governor’s proposed sales and use tax changes are likely the most sweeping. In addition to increasing the rate from 5.75 percent to 6.25 percent, the Governor is proposing to expand the sales and use tax base to include a number of service transactions. These include market research, lobbying, public relations, management consulting, debt collection, parking, and travel services. Vendor compensation would be capped at $1,000 per month. Finally, the plan would increase the Commercial Activity Tax rate from 0.26 percent to 0.32 percent and would make certain tobacco tax changes, including taxing new vapor products (i.e., e-cigarettes). Please stay tuned to TWIST for future updates on the Governor’s tax reform plan. 

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.