Ohio Lawmakers propose ending marriage penalty tax, putting money back in couples wallets

Ohio Statehouse (file photo)

COLUMBUS, Ohio (WDTN) – I hate doing my taxes; I don’t mind paying them, but the process of figuring out what I owe and what my best filing option is can be tedious.

I am not alone in this. Kelly Dillon is a farmer here in Ohio. She and her husband, who works in concrete, have to figure out every year what filing status they are going to use; married filing separately or married filing jointly.

That means Kelly, who is the one who fills out the forms and figures out their best option, has to do multiple returns to get to find that answer.

To make matters worse, often the best option for the couple on their federal return is not the same as it would be on their state return.

Because Ohio forces couples to file with the same status on both state and federal returns, they could be hit with what some call a marriage penalty for filing jointly.

Filing jointly on their federal return could net them a break on taxes, but here in Ohio it pushes them into a tax bracket that forces them to pay more than if they filed separate returns.

This penalty is something State Representatives John Becker and David Leland both want to see go away, which is why they are sponsoring a bi-partisan bill to do just that.

Becker, a republican, does taxes on the side when he isn’t busy at the statehouse. Leland, a democrat, introduced similar legislation back 1983.

Back then, the legislature agreed to a compromise and instituted the joint filer credit, but Leland says it has never been updated for inflation since and is now inadequate.

Eliminating the marriage penalty would affect an estimated 2.5 million Ohioans, and cost the state around $500 million dollars.

It averages out to a few hundred bucks per couple depending on how much they earn.

Putting money back into the pockets of hard working Ohioans is an attractive venture for the lawmakers, but the tough part will be coming up with ways to off-set the cost to the state.

Representative Becker says he would like to cut spending to balance things out, but is open to all sorts of ideas including one he says is a viable option from Representative Leland.

Representative Lelands idea is to tweak the Small Business Income Tax deduction so that the top 0.5% of earners can’t access it.

That would affect about 29,000 individuals in the state, the poorest of which could bring in $250,000 annually.

Leland says cutting off the deduction from the top 0.5% generates the $500 million needed for the tax break he and Rep. Becker are seeking for the 2.5 million Ohioans.

He also says it would not kill the Small Business Income Tax deduction for the people who need it most, the truly small businesses.

The bill itself still has a long way to go.

Tuesday it had its first hearing with the House Ways and Means committee.

In the meantime, Rep. Becker says he is determined to get the bill passed. If it doesn’t make it through as a bill, he will continue to try to get it added to the state budget as an amendment.

He says it is the number one thing he is working on.

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