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Mid-Biennium bill proposes increases to business and tobacco taxes to fund income tax reduction

The governor’s highly anticipated Mid-Biennium Review (MBR) bill was introduced this week to the ire of many Ohio retailers. House Bill 472 would provide an 8.5 percent income tax reduction over three years paid in large part by Ohio’s smokers, businesses and oil and gas producers.

Tobacco taxes

The MBR increases the rate of the cigarette excise tax from the current $1.25 per pack to $1.55 per pack beginning July 1, 2014, and to $1.85 per pack beginning July 1, 2015. [more]

Severance tax

The governor’s severance tax proposal would increase the rate to 2.75 percent on gross receipts for horizontal wells. Currently, the severance tax for oil is 20 cents per barrel and $.03 per Mcf of natural gas and natural gas liquids. The proposal does not increase the percentage for vertical wells. If production for a vertical well is less than 10 Mcf per day, it would be exempt from the severance tax. [more]

Commercial Activities Tax

The governor’s proposal would increase the Commercial Activity Tax (CAT) from the current rate of 0.26 to 0.30. This would be the first rate increase since the CAT was enacted in 2005. Businesses with gross receipts exceeding $1 million a year pay this tax which is an annual privilege tax. [more]

Income tax reduction

Overall the tax proposal would take the top income tax rate down to 4.88 percent and provide an income tax cut of 8.5 percent to taxpayers over a three-year period, a savings of $2.6 billion. [more]