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Report Connects Business Tax Deduction To Economic Growth

Karen Kasler

A study from the Ohio Chamber of Commerce is touting the effectiveness of a tax deduction for company owners which they say keeps state competitive.

The report says the state's business income deduction helped generate a $5.9 billion increase in economic activity and led to 59,000 jobs, in 2018.

The deduction, known as BID, allows business owners to not pay taxes on the first $250,000, and a flat 3% rate after that.

Justin Barnes, executive director of the Ohio Chamber of Commerce Research Foundation, says this report builds support for keeping the deduction.

"This is another avenue for lawmakers to understand how businesses are impacted by taxes in the state of Ohio," says Barnes.

In 2019, House Republican leadership with support from most Democrats tried and fell short of reducing the deduction.

The deduction results in a $1.1 billion loss in tax revenue for the state.

Policy Matters Ohio, a liberal think tank, says there are other investments that could be made with that revenue to spur economic growth, such as making college more affordable. The group also says Ohio is still under performing the rest of the country in several metrics of economic growth.

"The study attempts to analyze what might have happened, using certain assumptions. But we should look at what we know did happen. In fact, Ohio’s economic performance between the start of the business income deduction and the beginning of the pandemic lagged behind that of the nation," Zach Schiller, Policy Matters Ohio research director, said in a written statement.

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