Ohio governor proposes elimination of nearly all income taxes paid by small businesses

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COLUMBUS, Ohio — Gov. John Kasich on Thursday proposed eliminating nearly all income taxes paid by small businesses to take advantage of the improving economy and help more people get jobs.

Kasich's proposal, to be unveiled in his budget next week, eliminates the tax on income for small businesses with annual gross receipts of $2 million or less. The governor also is bumping up the personal income tax exemption for low- and middle-income workers.

Kasich said the fact Ohio has regained thousands of jobs lost in the recession and has a current unemployment rate of 4.8 percent is good, but not good enough.

"We have to continue to drive the incentives for job creation," Kasich said as he unveiled the proposals at the Ohio Association of Community Action Agencies' winter conference.

The tax cut would cost the state about $700 million over two years and the income tax exemption another $372 million, a fraction of Ohio's current $60 billion-plus budget.

The governor hasn't said how he'll make up the cost. His budget plan due out Monday is expected to result in a net $500 million tax cut, according to the administration.

Though praising the proposed drop in small business taxes, Republican leaders who control the House and Senate said their members would not support tax-shifting.

Senate President Keith Faber said his GOP members would be open to changes in the way Ohio's taxes are structured that result in a net tax cut for the state.

Democratic leaders also questioned the details of Kasich's plan and whether it could affect how much residents pay in other places, such as property taxes or sales taxes.

Kasich also unveiled proposals to help economically struggling Ohioans move out of poverty. He's proposing making it easier for low-income families to keep child-care subsidies as their income increases.

Normally, families lose eligibility for subsidies when their income tops 200 percent of the federal poverty rate, or $3,298 a month for a family of three. Under Kasich's proposal, the subsidies would be gradually phased out until income hits 300 percent, or $4,948 a month for a family of three.

Kasich is also proposing using $310 million in state and federal dollars to create more comprehensive county job programs that focus a variety of services on individuals based on their needs.

Kasich, a Republican, often speaks of the need to help the disadvantaged even as he promotes the importance of business development. He bucked some in his party by pushing Medicaid expansion under President Barack Obama's health overhaul.

"Helping people who live in a difficult situation and allowing them to stay there is a rip-off to them and to their children," Kasich said.

Thursday's appearance comes in the wake of an inaugural address in which Kasich said he wants to see some of the state's economic prosperity shared with people who live "in the shadows," such as the poor, mentally ill and undereducated.

Associated Press Writer Ann Sanner contributed to this report.

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