The Kasich administration has proposed a major new income tax break for owners of Ohio businesses. These include a variety of different kinds of businesses -- S Corporations, limited liability companies, partnerships and sole proprietorships -- that have one thing in common: Ohio does not tax the businesses directly on their profits, but rather as the profit passes through to the individual income tax returns of the owners. Hence, they are called "passthrough entities."
This new tax break is unlikely to generate new jobs. A recent study by Michael Mazerov of the Center on Budget and Policy Priorities finds that state income-tax cuts won't help small businesses create jobs.1 This brief, which should be read together with the Mazerov study, provides Ohio data relevant to the Kasich proposal.