Wednesday, March 16, 2005


Ohio tax "reform": The devil or the deep blue sea

It's no wonder the business community is divided over the tax changes being contemplated in Columbus. Under the current system, the fat cats have this (from the Dispatch):
Although their sales topped $1.5 billion apiece, only four of Ohio’s 10 largest companies paid more than the state’s $1,000 minimum corporate franchise tax last year. Two got money back from the state after tax credits. More than a third of the top 50 companies paid the minimum in the state’s main business tax or got money back, according to Ohio Department of Taxation data requested by The Dispatch. Company names weren’t released.

"At a time when we’re charging people to go to parks and cutting people off Medicaid, certainly the largest corporations ought to be paying more than they are," said Zach Schiller, research director of Cleveland-based Policy Matters Ohio.
On the other hand, the Taft tax change proposals would have this affect on taxpayers (via the Campaign to Stop Ohio's Slide):

Average Tax Change Under Governor Taft’s Plan

So, let's face it. There is no serious attempt to bring about any tax fairness or equity going on among the Republicans in Columbus. (The outnumbered Democrats are essential irrelevant in this matter.) Yes, yes, we know there is also a new commercial-activities tax that's been thrown in. And, yes, there is a huge revenue gap that must be addressed in the state budget. But as John Honeck, another PMO staffer pointed out today before the Senate Ways and Means Committee:
. . . the tax changes introduced would generate insufficient revenue in 2006-07, result in a net revenue shortfall of $2.1 billion by 2010 when compared to extending the current tax structure, and shift the tax burden from wealthy individuals to the poor and middle-class. The income tax cut would result in one-seventh of the reduced payments to the state being shifted to the federal government because of reduced deductions on federal tax forms.
Armed with this data and what appears to be a little of the "go with the devil you know" attitude, PMO says a better approach is to keep the corporate franchise tax but modify it or eliminate the loopholes.

The SOS, however, says:
It’s time to go back to the drawing board and come up with a revenue package that’s fair, that will fund the critical services we need, and that won’t mortgage Ohio’s future.
While we don't give the PMO solution much of a chance, at least it is grounded in the reality that there is sizeable distaste among some of the business community (like the Retailers and the Chamber of Commerce) for the proposed CAT tax. The SOS's ideas are long on enthusiasm but short on practicality given the Republican domination of state politics. It's worth talking up these ideas, but we are unclear why the SOS isn't backing PMO and explore whether or not its possible to get the disparate political force to clean up the franchise tax.


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