“The “pass-through loophole” is now costing Ohioans almost $1 billion a year. ”
The following article was originally published in the Ohio Capital Journal and published on News5Cleveland.com under a content-sharing agreement.
The tax break is one of many gambits in which Ohio’s political leaders have sapped billions from the state treasury over the past decade and given the money primarily to wealthy individuals and companies for the ostensible reason of growing the economy. For example, Ohio’s share of workers in the smallest businesses, those employing fewer than 20, has declined since the tax break has been in place.
The Ohio tax break applies to so-called"pass-through" entities: some limited-liability companies, S corporations, sole proprietorships, partnerships and the like. The Ohio law exempts the first $250,000 of income from such entities from any taxes, and taxes the rest of annual income at a rate of 3% — a one-quarter break from Ohio's top income tax rate of 3.99%.
The Policy Matters analysis also determined that the loophole is being taken advantage of by shell corporations and entities that can't properly be called businesses. "Overall, according to Treasury data, 86% of pass-through entities — the vast majority — do not create jobs for anyone other than their owners," the report said.Former Kansas Gov. Sam Brownback led the charge in 2012 and 2013 to eliminate pass-through taxes altogether and to slash state income taxes, especially for top earners.
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