Recently, Ohio Governor John Kasich announced he was looking at a possibility of reducing the tax withholding tables that determine how much money is taken out of employee’s paychecks to cover their tax burdens.
If the change happens it would be late in 2018, potentially November or December.
Kasich wants to reduce the withholding table by 3.1% percent which would bring it in line with the planned reduction of 6.3% from a few years ago that was not fully implemented by the state legislature.
Ultimately, reducing the withholding table means that less of an employee’s money is taken out of their paycheck and set aside to cover their income tax liability.
Technically that gives the employee more money to spend and increases their spending power as Andrew Bean with Glenn Bookkeeping points out.
“I think most people want as much in their pocket from week to week, from paycheck to paycheck, instead of waiting for a refund that comes once a year, to increase their spending power a little bit more,” said Bean.
And while it is true, if this were to happen employees would get more money on their paychecks; it is not likely to be a significant amount according to Bean.
“Nobody’s lifestyle is really going to change when they lower the withholding tables,” said Bean. “Somebody making minimum wage might make a 10 or 15 cent per check difference, so, not really noticeable; if you’re making $150,000-$200,000 a year, you’re talking a couple of dollars a paycheck, so again, not really noticeable,” said Bean.
That’s because the individual’s tax responsibility isn’t changing, just how much is set aside to cover it.
So why bother?
There are a few reasons and one of them is because the State can, and I mean that literally.
It would cost around $150 million to make this adjustment.
Several years ago, the state legislature chose to only reduce the table by half the planned amount out of concerns over the cost to do so.
This year, it is projected the State will have a surplus of around $368 million, more than enough to pay for this one-time fee to adjust the table.
Another reason to make the adjustment is reflected in something Bean pointed out for employees.
“The idea is to be even at the end of the year; not owe a bunch, not get a bunch back,” said Bean.
There is some cloudiness to how this adjustment will get done.
The administration has clearly stated that they plan to propose these changes to leadership at the Statehouse later this year.
However, when pressed if the administration needed the approval of the legislature in bill form to implement this change Director of the Office of Budget and Management Tim Keen refused to answer the question.
“I’m not going to speak to that,” said Keen.
After being asked if he thought the administration could try and do this with an executive order, he remained silent.
Ultimately Keen said this, “It is a proposal that we will discuss with the General Assembly and determine the best way to proceed.”
Democrat member of the Ohio House of Representatives and member of the House Finance Committee, Jack Cera doesn’t think that this should be done before the next budget.
As a citizen, and bookkeeper, Bean also doesn’t think this should happen before the end of the year due to the small amount per paycheck that the adjustment would give.