The Ohio House recently passed a two-year budget (HB 166). It has rightfully earned praise for its solid income tax cut.
However, a deeper look reveals some bad policies that would make it more expensive for small business owners, visitors to the state, and people hailing a rideshare. And it also includes a measure that would punish innovation in medicine by bringing socialist price controls to the Buckeye State.
For starters, small businesses face some big changes under the House budget.
The plan reduces the amount of income small businesses can deduct from $250,000 to $100,000. It also removes a 3 percent cap on the tax rate for income over $250,000 – meaning businesses earning more than that could face a tax rate over 4.67 percent, a significant increase. It is also retroactive, which can be very difficult for small business owners who now will face unexpected costs.
The Ohio chapter of the National Federation of Independent Businesses (NFIB) has raised concerns over the changes.
The House budget also includes a tax hike on booking travel. It imposes occupancy tax on service fees for online travel agent services.
These services, like Expedia, Travelocity, and others – make it easier for people to book hotels or other accommodations online. They attract travelers, which are a boon for restaurants, shops, and other local businesses.
The thing is, the cost of your hotel room is already taxed. The House proposal adds taxes to service fees, driving up costs for Ohioans and out-of-state visitors when they use travel booking services.
That’s not the end of the taxes in the House plan. Ridesharing would also get more expensive.
Legislation that would require online marketplaces to collect and remit sales taxes will, perhaps unintentionally, ensnare for hire vehicles. The straightforward impact is the state sales tax will hit ridesharing.
It’s not only bad if unintentional, but this is also a form of double taxation. Ridesharing drivers are already paying income tax on their earnings, and now will have to deal with sales tax. This burden will only make life tougher for drivers, and more expensive for Ohioans.
Another part of the budget would bring foreign price controls to Ohio by allowing countries with socialist health care systems to influence prescription drug reimbursement rates for Medicare Part B.
As Americans for Tax Reform wrote in submitted testimony:
“The Department of Health and Human Services (HHS) recently proposed the “International Pricing Index” (IPI) payment model for drugs administered under Medicare Part B. Essentially, this payment model imports foreign price controls into the United States by calculating the Part B reimbursement rate based on the prices set by 14 other countries.”
The bottom line: the progress the House is making with their income tax cut is weighed down by the harmful proposals in the very same budget. Senate leaders can help the House’s income tax cut become even better by detaching it from tax hikes and socialist drug pricing controls.