Ohio’s Biennial Budget Process Begins: Key Tax Proposals to Watch
Every two years, Ohio embarks on crafting a new state budget, and 2025 is no exception. Governor Mike DeWine initiated this process on February 11 by introducing his proposed budget, House Bill 96 (“HB 96”), in the Ohio House of Representatives. Over the coming months, the House will review, hold hearings, and pass its version of the bill before the Ohio Senate takes up deliberations. With the new fiscal biennium beginning on July 1, lawmakers and the Governor are expected to finalize the budget before that deadline.
Beyond funding state agencies and programs, the biennial budget also includes important tax policy changes that impact revenue collection. Governor DeWine’s proposal outlines several key tax measures:
Tobacco Tax Increase – Raises the tax on tobacco products by $1.50 per pack.
Sports Gaming Tax Adjustment – Increases the tax on sports gaming revenue from 20% to 40%. This tax was originally set at 10% when sports betting was legalized in Ohio but was soon doubled to 20%. For context, other states impose varying rates, with New York and Rhode Island taxing as high as 51%.
Recreational Marijuana Tax Increase – Doubles the tax on recreational marijuana from 10% to 20%.
New Child Tax Credit – Introduces a $1,000 tax credit for parents of children aged six and under, with a phaseout based on income.
Unemployment Tax System Fee – Implements a new 0.15% technology and customer service fee on wages per employee, capped at $13.50 per employee, to fund upgrades to Ohio’s unemployment benefits IT system.
Notably absent from the proposal are further reductions to personal income tax rates or reforms to the commercial activity tax (CAT). Over the past two decades, Ohio has steadily reduced income tax rates and eliminated tax brackets. Additionally, beginning in 2025, the CAT annual exclusion will increase to $6 million, effectively removing 90% of previous CAT filers without significantly reducing total tax revenue.
Additional Legislative Proposals to Watch
While the Governor’s budget sets the stage, lawmakers have introduced additional tax-related proposals that could be considered during this budget cycle, including:
Establishing a flat income tax rate of 2.75%
Allowing the full deduction of bonus depreciation claimed for federal tax purposes
Exempting overtime wages from income tax
Modifying real property tax policies, including changes to the homestead exemption
The budget process remains fluid, with potential changes and negotiations shaping the final outcome. CSH will continue to monitor developments and provide updates as the budget progresses.
For questions about how these proposed changes may impact your business, consult your CSH advisor. New to CSH? You’re in great company. Let’s connect and discuss ways we can add value to your business.
