COLUMBUS, Ohio (AP) - State senators on Tuesday pulled what's left of Republican Gov. John Kasich's proposed income tax cut from the state budget in favor of tax relief targeted at small businesses.
The move by the GOP-led Ohio Senate Finance Committee came as a political blow to Kasich, who pledged to reduce the statewide income tax if elected. The Ohio House had retained 7 percent of the 20 percent permanent income tax cut originally proposed by Kasich. It was among dozens of changes the Senate is making to the House budget bill.
Senate President Keith Faber, a Celina Republican, said income tax relief will continue to be debated as budget deliberations progress.
Rather than embrace the broader income tax cut, the Senate chose to restore a small business benefit also proposed by Kasich. That proposal would allow individuals to deduct up to $375,000 in net annual business income for income tax purposes. The Senate tax break is worth roughly $1.4 billion, compared with the roughly $1.5 billion price tag for the House's income tax plan.
Asked why the Senate's tax cut was better than the House's plan, Faber said, "Because it's about creating jobs and growing the state's economy."
Faber said the state already recently had a 4.2 percent, across-the-board income tax cut, and senators wanted to help the small businesses that were adding to the job market.
With rosy state revenue adjustments expected next month, the stage has been set for a potential tax compromise incorporating elements of both plans when the two chambers come together in late June to reconcile their budget differences.
As anticipated, Senate budget changes did not include expansion of Medicaid under the federal health insurance overhaul. Senators also left out a tax increase on high-volume oil and gas drillers proposed by Kasich and expansion of the state sales tax to include professional services like lawyers. The bill keeps a provision effectively de-funding Planned Parenthood by putting it at the back of the line for public funds.
Faber said the idea of changing Medicaid is not dead but will be taken up in a separate bill. A placeholder measure could come in the next two weeks.
Republicans senators are split over whether to extend Medicaid coverage.
"I have yet to see a proposal that I can tell you there's a majority of my caucus that supports," Faber told reporters.
Roughly 366,000 low-income residents would be eligible for Medicaid coverage beginning in 2014, should the state decide to expand the program under President Barack Obama's health care law. Ohio would get $13 billion from the federal government to cover program costs over the next seven years, according to the Kasich administration.
Senators held off making any immediate changes to school funding, though the Senate president said the chamber would have its own version of the formula in the next week.
"We're looking at some significant increases in funding for K-12 over the current system," Faber said. "But where that ends up is still in a matter of flux. Stay tuned."
Facing political pressure from both parties, senators removed a budget provision that would have forced universities to offer in-state tuition to out-of-state students who request the documents necessary to vote in the state, which had been criticized for its potential to suppress votes.
Universities often provide documents, such as utility bills, to serve as students' proof of residency when they register to vote in the presidential swing state. The provision had required universities that continue to provide such documentation to charge those students lower in-state tuition.
The Inter-University Council of Ohio, which represents the state's 14 public universities, estimated that more than 29,000 students would fit that description. And the measure could have cost universities up to $370 million.
Executive Director Bruce Johnson praised the Senate for removing the item. "It's gone and we're happy about it," he said.
Faber said members on both sides of the aisle requested the student voting measure be pulled from the budget. Though, he added, he thought the issue merited further discussion.
Overall, Faber said he expected the final budget to be close to the governor's proposal: "I think at the end of the process it's going to be largely intact."