Governor DeWine Proposes New Biennial State Budget, House Bill 96

February 28, 2025

Ohio House of Representatives To Conduct Hearings On Proposed State Budget

It’s February of an odd-numbered year, which means it’s time for Ohio to craft a new biennial state budget. Governor Mike DeWine kicked off this process on February 11 by introducing his proposed budget in the Ohio House of Representatives, House Bill 96 (HB 96). The House will conduct hearings and pass its version later this spring. After moving through the House, the Ohio Senate will take its turn to do the same. The first day of the state’s fiscal biennium is July 1. Therefore, we expect the Ohio legislature and the Governor to agree on the final version of the budget before that date.

The budget not only appropriates funds for state agencies and programs, but it also makes changes to tax statutes that impact the collection of those state funds.

Changes To Note

Governor DeWine’s proposal contains the following tax items:

Increases the tax on tobacco products by $1.50 per pack.
Increases the sports gaming tax from 20% to 40%. This tax was 10% in the original legislation that legalized Ohio sport gaming. The General Assembly raised it to 20% shortly thereafter. Tax rates in other states run the gamut, including as much as 51% in New York and Rhode Island.
Increases the tax on recreational marijuana from 10% to 20%.
Create a child tax credit of $1,000 for parents of a child age six and younger, subject to a phaseout based on income.
A new technology and customer service fee of 0.15% of wages per employee. This fee will be paid as part of unemployment tax contributions to the Ohio Department of Job and Family Services (ODJFS). The fee, which equates to a maximum of $13.50 per employee, is intended to fund upgrades to the state’s unemployment benefits IT system.

Missing from the proposal is any further reduction to personal income tax rates or any reforms to the commercial activity tax (CAT). The General Assembly has gradually reduced income tax rates and eliminated tax brackets over the last 20 years, and increased the CAT annual exclusion to $6,000,000 for 2025. This latter change removed approximately 90% of prior CAT filers from the rolls without significantly reducing revenue from the CAT.

Other Considerations On the Docket

Predicting what the final budget will look like is a tricky exercise. Still, several other proposals have been introduced by members of the legislature and may be considered during this budget season. These proposals include, for example:

Enacting a flat income tax of 2.75%
Allowing full deduction of bonus depreciation claimed for federal income tax purposes
Exempting overtime wages from income tax
Modifying various aspects of real property taxation including the homestead exemption

GBQ will continue to monitor statehouse proceedings and provide future updates when warranted. If you have questions about how the budget will affect your business, reach out to your GBQ advisor or a member of the State and Local Tax team.

By John Petzinger, State and Local Tax Manager