Ohio House passes bill to fix small business tax in budget

COLUMBUS (AP) — A bill that seeks to avert an unintended tax increase on some small businesses cleared the Ohio House today and was likely headed to the governor’s desk.

The measure comes after an apparent oversight in crafting a tax break during the frenzy of state budget negotiations.

The budget that passed in June allows small business owners to deduct up to 75 percent of their first $250,000 of business income this tax year, then 100 percent in 2016. In both years, a 3 percent flat tax is applied on the remaining net business income.

But lawmakers had intended the flat tax be applied only on business income in excess of $250,000.

That means for this tax year, some business owners could end up paying more on the 25 percent of their income that’s not deductible, because they typically pay less than a 3 percent rate under the state’s graduated income tax system.