While Extending Ohio Sales Tax to Architectural Services
If adopted by the Ohio General Assembly, the budget Governor Kasich unveiled February 4 would reduce every architect’s income taxes and most firm taxes, but would subject most services, including architectural services, to a reduced state sales tax. It would also increase the funding of the Ohio Architects Board by 1% over its original request (due to an increase in IDP fee reimbursements resulting from Kent State’s mandatory IDP enrollment policy).
The Kasich proposal would implement a permanent personal income tax cut to 20 percent over three years and reduce the state sales tax rate from 5.5 percent to 5 percent, while at the same time extending the sales tax base to all services except for those that can be broadly categorized as related to health care, education and housing.
In addition, the budget proposes a deduction of 50 percent of the business income for small businesses that are categorized as “pass through entities” such as S corporation owners, partners in partnerships, owners of limited liability companies (LLCs) and sole proprietorships earning up to $750,000. Thus the deduction is capped at $375,000 annually. The plan would cut income taxes paid by small businesses by 50%.
The tax reductions are designed to make the state more attractive to business development and will be funded in part by a $2 million surplus, which the state expects to achieve by next July, as well as a proposed 4% Ohio severance tax on horizontal wells.
The governor says he wants to move Ohio away from what he perceives as an overreliance on the income tax and a sales tax system that has fundamental inequities to a restructured tax system “that … relies less on income and more on consumption and resource extraction.”
The Ohio House of Representatives and Senate will now vet Kasich’s tax proposals–along with his recommendations on health care and education. Historically, multi-faceted tax proposals have been controversial and generally not concluded until the General Assembly recesses for the summer, if then.
Within legislative halls, immediate reactions to the multi-faceted proposals were mixed. Democrats favored some parts of the package, but questioned others. Republicans noticeably were silent.