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‘On the Money’ Looks at Tax Reforms

November 16, 2006

‘On the Money’ Looks at Tax Reforms

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The following is an excerpt from the “On The Money” publication, written by the consulting firm of Levin, Driscoll, and Fleeter.

“Economists like to say that there is no such thing as a free lunch. The phrase is meant to convey the idea that to get something of value, you must give up something of value, even if the trade isn’t always apparent. Budgets and tax reform can be thought of as involving a series of trade-offs. HB66, like all budgets, involved a great many of them. Major tax reductions were, in effect, paid for with some offsetting tax increases (and also with some spending reductions).”

The article looks at the six major tax reforms in HB66. The first two changes — CAT and cigarette — are tax increases; the other four are reductions.

“To illustrate the phase-in aspect, we’ll generally make note of the first-year cost (FY06) and fifth-year cost (FY10). In two cases, the cigarette and sales taxes, the impact doesn’t change appreciably over time. Both were fully implemented in the first year. In the other four cases, the impact rises or falls dramatically. They are the reforms that are phased in or phased out over the period.”

The preceding article is an excerpt from The Hannah Report, Ohio’s daily legislative newsletter providing independent, timely and comprehensive coverage of state government. For more information, please contact Hannah News Service at 614.228.3113. From Hannah News Service

Dems Respond to DeWine Ad, Start War of Words

October 20, 2006

Dems Respond to DeWine Ad, Start War of Words

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The negative advertising in the U.S. Senate race is going full force with nearly four months to go to the election.

The Ohio Democratic Party unveiled its response to a recent ad by U.S. Sen. Mike DeWine that attacked his opponent, U.S. Rep. Sherrod Brown, for being “weak on national security.”

The new ad criticizes DeWine for using 9/11 images in his advertisement and tries to paint him as being weak on security.

The party also put out a statement criticizing DeWine for his negative ad, saying negative campaigning is not new to DeWine and highlighting a series of ads he ran against former U.S. Sen. John Glenn when he ran in 1992.

“Mike DeWine should be ashamed of exploiting the hallowed ground of 9/11 for his partisan purposes,” said party Chair Chris Redfern in a statement. “When you look at his own voting record, as a member of the Senate Intelligence Committee, his exploitation of 9/11 and attacks on Sherrod Brown show how out of touch he really is with his own responsibility for homeland security issues.”

The Ohio Republican Party responded by releasing excerpts of media stories about Brown’s voting record on national security.

“The Democrats are trying to paint over a rusty bucket,” Ohio Republican Party Chairman Bob Bennett said in a statement. “Sherrod Brown can gloss over his pathetic record on national security, but the truth will eventually eat its way through. Brown has done more to leave our country vulnerable to terrorism than nearly anyone in the U.S. House. Anyone who looks at his record on national security knows it’s toxic, even his fellow Democrats.”

The preceding article is an excerpt from The Hannah Report, Ohio’s daily legislative newsletter providing independent, timely and comprehensive coverage of state government. For more information, please contact Hannah News Service at 614.228.3113.

Voters Face Up to Five Ballot Issues in November

October 20, 2006

Voters Face Up to Five Ballot Issues in November

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By the time voters hit the polls in November, they may have up to five statewide issues to vote on. Two of the five issues hit employment law matters and will be of great interest and concern to manufacturers.

After a year in which it seemed like dozens of potential issues were starting up, five dealing with smoking, gambling, workers’ compensation and minimum wage were the only ones submitted before the deadline on Wednesday.

James Lee, a spokesman for Ohio Secretary of State Ken Blackwell, said the issues must be certified by Sept. 8, at which time the office will inform county boards of elections which candidates and issues are on the statewide ballot so those boards can set their voting machines. In the meantime, the Ohio Ballot Board is expected to meet soon to finalize the language of the issues as they appear on the ballot.

One issue that won’t be on the ballot is the Tax Expenditure Limitation amendment that had been pushed by Blackwell. Although the signatures had been certified, Lee said the office has received the necessary letter from the amendment’s organizers asking for it to be withdrawn. He said the office won’t submit it as a ballot issue on Sept. 8 with the others.

OMA members should pay special attention to the 1) SB 7 Referendum, and the 2) Minimum Wage Ballot / Employment Privacy issue. Both issues have the potential to distort Ohiolaw-making and will result in greater employer liability and costs. Some level of individual company advocacy will be needed in the coming weeks and months if manufacturers are going to impact these outcomes. The OMA has been leading an effort to challenge efforts to put the SB7 repeal on the ballot. OMA member financial support have greatly aided in this effort. 

The ballot issues that were submitted are as follows:
2006 Ballot Issue Summary
August 9, 2006

Portions of the preceding article is an excerpt from The Hannah Report, Ohio’s daily legislative newsletter providing independent, timely and comprehensive coverage of state government. For more information, please contact Hannah News Service at 614.228.3113.  From Hannah News Service  

Strickland’s Running Mate Criticizes Blackwell Turnpike Plan

October 20, 2006

Strickland’s Running Mate Criticizes Blackwell Turnpike Plan

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Over the past few days Ted Strickland’s campaign has been targeting gubernatorial opponent Ken Blackwell’s plan to lease the Ohio Turnpike for criticism.

Strickland’s running mate Lee Fisher issued press releases this week highlighting a study and media reports that found tolls on privatized roads have increased.

“Expert analysis of other toll-road privatization schemes confirm what we’ve feared all along — leasing off our Turnpike will increase tolls, plain and simple,” Fisher said. “Selling off one of our state’s most valuable assets that was built by Ohioans and has been run by Ohioans to a foreign company and tying our hands for the next 99 years is incredibly short-sighted. It’s just one more of Mr. Blackwell’s quick-fix, short-sighted political gimmicks.”

Fisher cited stories from the Houston Chronicle, which said privatization studies in Harris County found officials would have to give up control of toll prices if an 83-mile toll system were privatized, and from a Toronto Star story in which officials said a privatized highway had become “a privately run vacuum cleaner for sucking money out of commuters’ pockets.”

Fisher also noted that truckers left the Ohio Turnpike and were traveling on local roads to avoid high tolls.

The preceding article is an excerpt from The Hannah Report, Ohio’s daily legislative newsletter providing independent, timely and comprehensive coverage of state government. For more information, please contact Hannah News Service at 614.228.3113.  From Hannah News Service

Sales Tax Simplification Agreement, Amnesty Program In Effect

October 5, 2006

Sales Tax Simplification Agreement, Amnesty Program In Effect

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The Streamlined Sales and Use Tax Agreement (SSUTA), a multi-state agreement providing for simplification of the nation’s varying sales tax laws, is now in effect, marking the beginning of one of its key components, the amnesty program, according to a statement released recently (10/02).

The simplified system reduces the number of sales tax rates, brings uniformity to definitions of items in the sales tax base, significantly reduces the paperwork burden on retailers, and incorporates new technology to modernize many administrative procedures.

The agreement is the culmination of a multi-year, nationwide effort by 44 states — including Ohio – the District of Columbia, local governments, and members of the business community to develop measures to design, test, and implement a system that radically simplifies sales and use tax collection and administration by retailers and states. The agreement takes effect just shy of three years from its initial approval date of Nov. 12, 2002.

The October 1 effective date of the agreement triggers a web-based centralized point of sales tax registration for the member states (https://www.sstregister.org/sellers), an amnesty period for sellers that have not been contacted by member states for audit, and finalizes the process for certification of software that will assist in sales tax collection responsibilities.

The other full-member streamlined states include Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, New Jersey, North Carolina, North Dakota, Oklahoma, South Dakota, and West Virginia. Associate-member states are Ohio, Arkansas, Tennessee, Utah, and Wyoming. Nevada will become an associate-member state on January 1, 2006. It is anticipated that other states will become members as this effort moves forward.

Dwight Cook, president of the newly-formed Streamlined Sales Tax Governing Board, Inc., a not-for-profit entity established to manage and administer the SSUTA, said the launch of the effort represents a “more rational and efficient sales tax system for the nation as a whole.”

The amnesty program will be available in all states participating as full members or associate members, like Ohio, of the SSUTA. Amnesty is available for sales or use taxes uncollected or unpaid on sales by retailers for any period prior to registration through the Streamlined Sales and Use Tax Central Registration System (SSUTCR). While current law does not require e-commerce and direct mail companies to collect and remit sales taxes on transactions that occur in jurisdictions where they do not have a physical presence, the states expect some of these companies may come forward and volunteer to collect taxes under the simplified system.

In Ohio, Sen. Ron Amstutz (R-Wooster) was successful in providing an amnesty program (SB26) for Ohio small businesses. Ohio’s law changes the deadline period for compliance to January 1, 2008, which gives more time for the complex issue of destination sourcing to unfold, but also requires Ohio to formulate its internal policies and procedures for complying with SSTP.

Gary Gudmundson, a spokesman for the Ohio Department of Taxation, said that while Ohio is not able to take full advantage of the system because it is not a full member of the system, it is an important program nonetheless. “It is a milestone in the roll out of a system that we’re hopeful will result in the collection of millions of dollars of taxes that are going uncollected,” he said, adding, “That revenue is important to state and local government, but as important is that the system will create protections for Ohio retailers who are trying to compete with retailers who are not charging tax.”

For full member states, the amnesty period will end on Sept. 30, 2006, unless a state otherwise provides for amnesty. For associate member states, the period will vary depending on the effective date of their compliance with the SSUTA.

A seller is not eligible in a member state if the following apply:
• The seller is currently registered in the member state to collect sales and use tax, or;
• The seller had been registered in the member state within 12 months of the state becoming a member state, or;
• The seller has received notice of an audit by the member state and the audit is not yet fully resolved, including any related administrative and judicial processes.

The following are excluded from the amnesty:

• Sales or use taxes owed by the seller in its capacity as a buyer;
• Sales or use taxes already paid or remitted to member states in which the seller was registered;
• Sales or use taxes collected by the seller that are unpaid to member states;
• Liability for taxes other than sales or use taxes.

Information obtained through the streamlined registration system may not be and will not be used by the member state for determining nexus for other taxes.

How amnesty works:

After Oct. 1, 2005, the seller visits the website of the Streamlined Sales and Use Tax Central Registration System (https://www.sstregister.org/sellers) to register to collect taxes for the member states in which the seller makes sales.
The information provided by the seller will be sent electronically to all of the full member states and to associate member states for which the seller has chosen to collect the sales or use tax.

The amnesty provisions in the agreement require that a seller must maintain its registration and continue to collect and remit applicable sales and use taxes for at least 36 months after the date of registration through the SSUTRS in a member state.
Amnesty will be available for a seller who registers through the Central Registration System and indicates its intent to use a Certified Service Provider (Model 1). Since Certified Service Providers are not available at this time, the Governing Board expressed its intent to allow sellers to register and delay collection responsibility until such time as the Certified Service Provider service is available. Amnesty will be provided throughout this time frame.

If a registration is not maintained for the required 36 months or if a seller is found to have committed fraud or intentional misrepresentation in the application, the amnesty agreement may be voided by the member state.

The preceding article is an excerpt from The Hannah Report, Ohio’s daily legislative newsletter providing independent, timely and comprehensive coverage of state government. For more information, please contact Hannah News Service at 614.228.3113.  From Hannah News Service

Ways and Means Approves Bill Accelerating Tax Cuts

September 14, 2006

Ways and Means Approves Bill Accelerating Tax Cuts

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The House Ways and Means Committee, without chair Rep. Sally Conway Kilbane (R-Rocky River) and with no testimony, recently (09/12) converted HB626 from a capital gains tax cut bill to one accelerating the personal income tax cuts already approved in the budget bill for this biennium, HB66. The committee then reported the bill out for floor action after the November election.

As explained by the bill’s chief sponsor, Rep. Chuck Calvert (R-Medina), the substitute bill accelerates the 21 percent tax cut enough to enact the entire cut one year early — in Tax Year 2008 rather than Tax Year 2009 as had been enacted. To do this, the substitute bill proposes additional reductions of two percent for Tax Year 2006 and 1.1 percent additional for both Tax Year 2007 and Tax Year 2008.

According to table prepared by the Legislative Services Commission (LSC), the tax cuts will be as follows:

Rate Reductions (cumulative from Tax Year 2004 Rates)

 Tax Year            2005       2006       2007          2008       2009
 HB66                  4.2%        8.4%       12.6%     16.8%     21.0%
 Sub HB626       4.2%      10.4%       15.7%     21.0%     21.0%
 
LSC estimated the cost of the cuts at $191 million for Tax Year 2006, $312 million for Tax Year 2007, and $444 million for Tax Year 2008 — money that he said can come from growth in state revenues and savings from implementing the spending limit passed earlier this year. “This will be more than enough to cover the cost.”

In addition, the substitute bill moves the start of the indexing of tax brackets for inflation forward one year, from Tax Year 2010 to Tax Year 2009. According to Calvert, that will initially cost $55 million.

The LSC analysis explains that in Fiscal Year 2007, the state General Revenue Fund (GRF) “is assumed to bear the full loss in revenue” due to the freeze in HB66 of funds for the Local Government Fund (LGF), the Local Government Revenue Assistance Fund (LGRAF) and the Library and Local Government Support Fund (LLGSF).

“In later years, the GRF is assumed to bear 89.5 percent of the revenue loss, the LGF 4.2 percent, the LGRAF 0.6 percent and the LLGSF 5.7 percent.”

Rep. William Hartnett (D-Mansfield), speaking for the Democrats on the committee, said that they believe there are other ways to look at tax issues such as tax credits, tuition credits and a reduction in the sales tax rather than just the approach used in the substitute bill. “Because of the speed and the only germane provision with the original bill is a reduction in taxes, we ask that there be full and open discussion on the floor with an ability to offer amendments,” Hartnett said. They did not, however, offer any amendments today.
Vice Chair Bob Gibbs (R-Lakeville) said there would be a full floor debate.

Among the members in attendance, all voted to report the bill out except for Rep. Michael Skindell (D-Lakewood) who voted no.

In other action, Rep. Larry Flowers (R-Canal Winchester) is the newest member of the committee, having replaced Rep. Mike Gilb (R-Findlay).

The preceding article is an excerpt from The Hannah Report, Ohio’s daily legislative newsletter providing independent, timely and comprehensive coverage of state government. For more information, please contact Hannah News Service at 614.228.3113.  From Hannah News Service  

Tax-Exempt Bonds Easier to Use for Manufacturers Due to Changes in Tax Law Permitting Increase in Capital Expenditures

September 9, 2006

Tax-Exempt Bonds Easier to Use for Manufacturers Due to Changes in Tax Law Permitting Increase in Capital Expenditures

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Today, tax-exempt bonds for manufacturing are easier to use than ever before. State volume cap is more readily available, having been hard to come by in previous years due to high demand. And, not only are tax-exempt bonds easier to use based on increased availability of volume cap, they are more financially beneficial. The interest rate for borrowing on a tax-exempt basis is generally more favorable compared to borrowing on a conventional/taxable basis. And, as interest rates continue to rise, the benefits of tax-exempt manufacturing bonds become even greater for manufacturers.

In addition, a scheduled change in federal tax law, with respect to the capital expenditure limitation for these types of tax-exempt bonds, will expand the number of manufacturers eligible to take advantage of the favorable interest rates offered by a tax-exempt bond financing.  As outlined below, this change in federal tax law is effective for bonds issued after December 31, 2006.

For tax-exempt bond purposes, a manufacturing facility is a facility (including manufacturing equipment) used in the manufacturing or production of tangible personal property, including the processing resulting in a change in the condition of such property. Manufacturers seeking to finance facilities with tax-exempt bonds should be aware of the restrictions and requirements associated with these bonds, including:

• 95% of the proceeds of the bonds must be applied to costs for land (subject to certain limitations) and depreciable property.

• Weighted Average Maturity of the bonds may not exceed 120% of the weighted average life of the assets financed with proceeds of the bonds.

• The principal amount of bonds plus all outstanding bond issues allocable to a particular business cannot exceed $10 million. In calculating the principal amount of the bonds outstanding, the capital expenditures of the borrower (including but not double counting the principal amount of the bonds to finance the particular facility) with respect to facilities located in the same municipality, or the same county if not located in an incorporated municipality, as the financed facility for the three-year period prior to the bond issue and the three-year period subsequent to the issuance date of the bonds must be included.

• For bonds issued after December 31, 2006, the internal revenue code permits up to $10 million of capital expenditures to be disregarded, in effect increasing from $10 to $20 million, the maximum allowable amount of total capital expenditures by a business in the same municipality or county if not located in an incorporated municipality.

• Limitations exist with respect to the amount of the proceeds of the bonds, which must be used for “core manufacturing” and the amount of the bond proceeds that may be used for ancillary and related warehouse/office space.

• A public hearing and state volume cap will be required as part of the issuance of the bonds through the governmental issuer. While volume cap was hard to come by several years ago, in most states there is ample volume cap available now for qualified small issue bonds.

• In Ohio and certain other states, labor for the construction relating to tax-exempt financed facilities must be paid at “prevailing wage”.

• Existing manufacturing facilities and integrated equipment may be acquired with bond proceeds subject to certain rehabilitation requirements.

While the above requirements must be satisfied, when compared with conventional financing, tax-exempt bond financing is far more advantageous to manufacturers, particularly in today’s economic climate. Manufacturers interested in pursuing tax-exempt bond financing should consult their legal counsel.  For more information, contact Robert B. Holodnak at 614.227.2347 or rholodnak@bricker.com; David A. Rogers at  614.227.2367 or drogers@bricker.com; or William T. Conard, II at 614.227.2351 or wconard@bricker.com.

Article by Robert B. Holodnak, Bricker & Eckler LLP.

Tax Reform on the Table Again

August 10, 2006

Tax Reform on the Table Again

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The business community told the House Ways and Means Committee Wednesday that more tax reform is needed in the state in order to turn around Ohio’s economy. House Speaker Jon Husted (R-Kettering) has also said publicly that he would consider an acceleration of the 21 percent reduction in the personal income tax.

With that said, Ryan Augsburger, managing director of public policy services for the Ohio Manufacturers’ Association, led off his testimony by emphasizing that Ohio is among the top manufacturing state economies ranking third in manufacturing output behind California and Texas. He said manufacturing contributes more to the gross state product than any other industry and employs a greater proportion of Ohioans (15.8 percent).

While complimenting the Legislature on the tax reforms which moved business taxation based on investment to one based on consumption, Augsburger said, “The job is never done, so we appreciate this committee’s work to consider further steps.”

He said only when the tangible personal property tax is completely eliminated and the personal income tax is phased down by the full 21 percent and the other changes are phased out and phased in, will a complete picture of Ohio’s true business tax rates be discernable. However, he said if surplus revenue is available in the interim, efforts to provide added tax relief seem most likely to preserve the good framework that has been adopted.

Augsburger said if additional changes are to be considered then the Legislature should consider altering the manner in which the owners of pass-through entities are taxed. He said owners of C-Corporations pay income tax based on business income actually distributed to them individually. They are not liable for tax on income earned by the C-Corp but retained and reinvested in the C-Corporation.

He said the same is not true for the owners of pass-through entities like S- Corporations, limited liability companies and partnerships. The owners of these businesses must pay personal income tax on the business’s entire net income — whether it is reinvested in the company or not. He said Ohio’s past tax system penalized company owners for investing in new technologies and processes — personal property tax — and he said the same punitive effect remains under the personal income tax for pass-through entities.

The preceding article is an excerpt from The Hannah Report, Ohio’s daily legislative newsletter providing independent, timely and comprehensive coverage of state government. For more information, please contact Hannah News Service at 614.228.3113.  From Hannah News Service  

Testimony of Ryan Augsburger before the House Ways and Means Committee

August 9, 2006

Testimony of Ryan Augsburger before the House Ways and Means Committee

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Testimony of Ryan Augsburger before the House Ways and Means Committee
House Ways and Means Committee
The Honorable Sally Conway Kilbane, Chair
Wednesday, August 9, 2006
 

Chairwoman Kilbane and members of the Ways and Means Committee, I appreciate the opportunity to speak with you today about recent tax reforms and possible future steps.  My name is Ryan Augsburger and I am Managing Director of Public Policy Services for the Ohio Manufacturers’ Association.

In case you were not aware, Ohio is among the top manufacturing state economies ranking third by manufacturing output (behind CA, TX).  Manufacturing contributes more to the Gross State Product than any other industry sector and employs a greater proportion of Ohioans (15.8%) than any other sector.  Manufacturing jobs are among the best paying, thereby contributing to a sound economic base.

The OMA represents nearly 1,800 manufacturing companies and we work to advance public policies that will enhance manufacturing competitiveness for Ohio.

Last year this Committee heard voluminous testimony on sweeping tax reforms.  The OMA was among the many proponents that provided supportive testimony.  The OMA believes those reforms are making Ohio a more competitive place to manufacture and we thank you for your work last year.  The job is never done, so we appreciate this committee’s work to consider further steps.

Please allow me to recap why we believe the reforms ultimately enacted in House Bill 66 last year were so crucial to improving manufacturing competitiveness.  Some on this committee will recall testimony offered last year by Cleveland State University Professor of Economics, Ned Hill.  As he has done in his research, Dr. Hill noted that Ohio’s incumbent business tax code was a relic of a bygone era when the economy was more localized. Today the economy is global.  One can conduct business with a party in China or India just as easily as with the person next door.  Ohio’s incumbent tax code did not evolve as the economy grew from a local economy to a world economy. 

Previous efforts to address the problems simply didn’t work.  Instead, in addition to punishing capital investment, the tax code became riddled with credits and deductions.  These well-meaning, but ineffective, efforts resulted in great disparity in the tax burdens of various groups of businesses.  As a result Ohio’s tax code had become a disincentive to many capital-intensive industries such as manufacturing.

In order for a manufacturing business to succeed in today’s fiercely competitive global economy, a business must innovate.  Innovation drives up product quality and drives down costs.  Innovation requires capital investment.  Until H.B. 66 became law, the manufacturer was effectively penalized for doing what it needed to do to survive.

Moving away from business taxation based on investment and towards consumption is a truly significant milestone.  Many thought it impossible.  For many years while the economy was in transition, such a change proved to be politically challenging.  During these years numerous manufacturing enterprises ceased production operations in our state.  Fortunately, last year, this body recognized the critical need to act, and did so.  We believe your action has stemmed the tide of further lost manufacturing jobs.

Along with the tax reforms, other recent legislative accomplishments like the myriad of tort reform laws, workers’ comp revisions (if allowed to take effect), and environmental permitting process improvements, are all enhancing Ohio’s reputation as a good place to conduct business.  In today’s global economy, Ohio must be competitive if it wants to retain and grow its manufacturing base.  Your work in support of further tax reform is another important step in the right direction.

We believe the first and most important “next step” is to fully implement H.B. 66 provisions.  There are two considerations to this suggestion:  1) Only when the tangible personal property tax is completely eliminated and the personal income tax is phased down by the full 21% and the other changes are phased out, and phased in, will we have a complete picture of Ohio’s true business tax rates.  Under H.B. 66 timeframes, four more years are required until those rates become reality. 2) Stability is needed for business planning.  Stability is also important to government revenue needs.  While we are cautiously optimistic, no one knows for certain what the long-term effect on revenue will be from the reforms.  Making wholesale changes to H.B. 66 provisions before phase in/out periods are complete, could result in instability which in general would not be favored by business.  If surplus revenue is available in the interim, efforts to accelerate H.B. 66 or efforts to provide added tax relief in those same categories seems most likely to preserve the good framework adopted.

Let me talk about personal income tax rate relief.  It has been said that Ohio’s personal income tax rate is relatively high.  The OMA concurs with that assessment and we believe the personal income tax relief was among the most important provisions of H.B. 66.  While efforts to accelerate the phased-in 21% reduction would be welcome by our membership, we hope that if additional tax changes are to be made, the committee will also consider the competitiveness of the overall rate once the phase-down is complete.  That rate, especially the top marginal rate, is so important because so many manufacturing businesses today are organized as a pass-through entity.  They pay their business tax via the personal income tax.  The lower that rate, the more attractive Ohio looks as a place to do business.  The more businesses that decide to remain in Ohio or expand in Ohio, the more jobs will be created and economic activity and tax revenue will follow.

If additional changes are to be considered at this time, another method of stimulating this type of economic activity that is consistent with the goals of tax reform would be to alter slightly the manner in which the owners of pass-through entities are taxed.  Owners of C-corporations pay income tax based on business income actually distributed to them, individually.  They are not liable for tax on income earned by the C-Corp but retained and reinvested in the C-Corporation.  The same is not true for the owners of pass-through entities like S Corporations, limited liability companies, and partnerships.  To the contrary, the owners of these businesses must pay personal income tax on the business’s entire net income, whether it is reinvested in the company or not.  As I stated earlier in my testimony, Ohio’s incumbent business tax system penalized company owners for investing in new technologies and processes.  I was referring to the horrible tax on personal property previously, however the same punitive effect remains under the personal income tax for pass through entities.  The vast majority of the OMA’s members would be highly supportive of a change in the personal income tax to treat owners of the pass-through entities in the same manner the state now taxes C-corporations.

I appreciate this opportunity to speak with you today as you consider further changes in the tax code to enhance Ohio’s business attractiveness.  In closing, I want to share with you that from the manufacturing perspective, Ohio is being watched by policy leaders across the country with both envy and panic.  More importantly business people are considering and making investment in Ohio.  These things could not have been said about Ohio 14 short months ago.

That concludes my prepared remarks.  I would be happy to try to respond to questions you may have.  Thank you.

Blackwell Provision Draws Expedited Hearings

July 21, 2006

Blackwell Provision Draws Expedited Hearings

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A key piece of Ken Blackwell’s gubernatorial platform that has surfaced in two separate tax bills in recent weeks drew comments from Senate President Bill Harris (R-Ashland) Wednesday, with committee hearings scheduled by month’s end.

Capital gain tax cuts in HB626 (Calvert), echoing a larger package of rollbacks in HB616 (Gibbs), were dismissed by Democratic Party Chairman Chris Redfern (D-Catawba) over the weekend, but Harris defended his fellow Republican while adopting a familiar posture of late.

“Knowing Rep. Calvert as I do, having served with him in the House, I wouldn’t say he makes decisions to introduce bills as a gimmick or a stunt,” noted the senate president of a plan to drop the capital gains tax to five percent in 2008, four percent in 2009, and three percent in 2010, more than halving the current rate. “I believe he is serious about lowering the burden on capital gains.”

At the same time, Harris recalled his comments on a range of tax reforms in Gibb’s proposal, including the capital gains rollback, lower rates on senior citizens, and the complete elimination of estate taxes.

“Measures like these will have to take into account tax cuts already enacted by this General Assembly,” he observed. “That will continue to be a consideration, without knowing final objectives in the House. We’ll wait and see what happens in committee.”

On a similar note, Harris said further budget measures in the recently introduced SJR9 (Coughlin) would likely force some soul-searching in the Legislature. The joint resolution would cap the increase in taxable property values at two percent a year, triggering a growth in school funding due to the base cost formula for state education dollars.

“We would have to look at how all resources are distributed,” he explained. “If we were required by law to increase the state share of school funding, the difference would likely be reflected in another area of the budget.”

SJR9 and HB616 have seen no action since their introduction several weeks ago, while capital gain provisions in HB626 are expected to receive hearings in the House Waysand Means Committee by the third or fourth week of July.