Democrats at the Ohio Statehouse have been calling for the elimination of the “LLC Loophole” for years.
The tax break given to individuals who own a business that makes up to $250,000 was put in place in 2015. It was supposed to spur job growth and reinvestment, but one of the biggest complaints against it is an apparent lack of both.
Some Ohioans making up to $250,000 started businesses and proceeded to pay no state income tax related to their “business” which had no employees outside of the owners. Wednesday, House Minority Leader Emilia Sykes discussed her concerns about the State Operating Budget with me citing the tax break as a source of potential revenue.
“That’s about $1 billion a year that we are losing from our state coffers that we need to fund education; and healthcare; and infrastructure; and the lake; and so, for us not to close it, I think, would be a horrible mistake especially considering we are overbudget, at the moment, and it’s a very good first place to look when we are looking for funding,” said Sykes.
When asked what kind of message it would send Ohioans to see programs and budgets slashed without addressing the “LLC Loophole,” she said it sends the message that the State does not care about working families. “That is not a message the Democrats are willing to send, and we will not send that message,” said Sykes.
A few hours later, Speaker of the House Larry Householder was asked about the substitute budget bill expected to be presented at a hearing tomorrow morning. At that time, 7News Ohio Statehouse reporter Jason Aubry asked what the majority caucus planned to do about the “LLC Loophole” and Householder told me they plan reduce who can benefit from it from business owners making up to $250,000 down to those making $100,000.
“If we do that, it makes a significant difference and we think that probably does provide incentives for small business people to go out and reinvest in Ohio,” said Householder. “We think that when you get above that number it starts to stray a little bit and we’re probably taking care of some folks that that are putting it in the bank or putting it in their pocket.”
Householder was asked if the 40% tax cut for people earning over $250,000 would also be going away, and the Speaker of the House nodded affirmatively. None of this is set in stone, of course. These reforms would be put forward as parts of the substitute bill for the State Operating Budget.
That bill would still have to be approved by the House of Representatives, then the Senate, and then it would have to be signed by the Governor; giving multiple opportunities to change, adjust, backtrack, or tweak how much the “LLC Loophole,” and that tax cut for those making over $250,000, will be affected.
The legislature has until the end of June to get a balanced budget put together, leaving the Senate less than a month to go over what the House has already done. The whole process was delayed by about a month, according to Sykes due to the budget not getting to the House as early as it normally does, and with the House taking its time in going over that proposal to come up with their own.
The next few weeks at the Statehouse will surely be fueled by motivation to get the budget done on time, and Sykes says it will be important that all lawmakers work toward making sure it is done right.