By Tim Cox
tcox@dailystandard.com Long overdue tax reform has finally put Ohio on a competitive level with other states in economic development, the state's top development official told a group of local business and government leaders this morning.
Lt. Gov. Bruce Johnson, who also serves as director of the Ohio Department of Development, detailed changes in state tax laws that were part of the recently approved budget during a speech at Wright State University-Lake Campus.
The state's old tax code was a "disincentive" to new investment, Johnson said.
"We punished people for modernizing their plants and equipment ... more so than any other state," Johnson said.
That has now changed. The tangible personal property tax applied to inventory and equipment will be phased out over the next four years. The corporate franchise tax -- a tax on profits at the corporate level -- also is being phased out over the next five years. Ohio is one of just a few states still charging businesses taxes on personal property, Johnson said. Such a tax hurts businesses because when the economy gets worse, product inventory rises and the tax burden goes up.
"It's the worst of all worlds, a vestige of the past," Johnson said.
The corporate franchise tax also was woefully outdated, he said. Ohio's corporate tax rate is the highest in the nation, but the tax collections were among the lowest per capita in the country, Johnson said. That is because the corporate tax code had 44 potential exemptions, which resulted in Ohio's largest companies -- those employing 25,000 or more -- paying no corporate taxes.
The lost tax revenue will be partially replaced with a new commercial activities tax. The new tax will be phased in over five years and will eventually be charged at a rate of 0.25 percent on corporate income over $1 million. A $250 flat tax will be charged for income between $40,000 and $1 million. Also, the new tax does not apply to income generated from revenue on products sold outside Ohio. It does apply to farm operations.
By not charging the new tax on products shipped elsewhere, the state is helping Ohio companies compete nationally and globally, Johnson said.
Personal income taxes also are to be rolled back by 21 percent over the next five years, Johnson said. The income tax cut will completely eliminate the state tax burden for the lowest income brackets.
Achieving success with the new tax plan will require hard work by legislators in Columbus for years to come, Johnson said.
"It's going to take fiscal restraint over time, but we have dramatically improved the investment climate in Ohio," Johnson said. |
