June 22, 2005

Ohio-Is-Hostile-To-Business Links of the Day (062205)

Filed under: Economy,Taxes & Government — Tom @ 4:29 pm

We’re supposed to be happy today in the Buckeye State. I’m not, because people refuse to see the relationship among these three stories about Ohio’s economy:

(click “more,” if necessary, to see what the three stories are)

1. Oh boy, we have a 2-year budget.

Taft’s budget and tax plan passed (bolds are mine; link may require subscription):

The tax reform plan contains several provisions designed to help business:

  • It will phase out the tangible personal property tax, which taxes equipment, inventory and furniture and fixtures, over four years. Such taxes discourage businesses from investing in Ohio, Taft has said. Newly purchased equipment will be exempt from property taxes.
  • The corporate franchise tax, which acts as an income tax for business, will be phased out over five years.
  • The franchise tax will be replaced by a “commercial activities tax,” which will place a 0.26 percent tax on a business’ revenue. The CAT would exempt the first $150,000 in annual gross receipts to protect small businesses.
  • The plan will cut personal income taxes by 21 percent over five years.
  • The plan retains a portion of the state’s 2003 hike in the sales tax, setting the tax at 5.5 cents on the dollar. The 2003 hike, which raised the tax from 5 cents to 6 cents, was intended as a temporary measure to plug a budget shortfall.

So when all is said and done, they couldn’t work up the nerve to get rid of the entire “temporary” sales tax increase, and they put into place a truly pernicious Commercial Activities Tax (The CAT) that will adversely impact high-volume, low-margin operations like warehouses and retail facilities. The CAT will also make a lot of professional-services firms in Cincinnati consider jumping across the river into Kentucky, and will make all but the very smallest businesses pay whether or not they are actually making money.

2. When tax receipts unexpectedly increase, lawmakers in our supposedly conservative state just decide to spend the extra money.

Just a couple of days ago, $1.2 billion in “cuts” were restored. In English, with rare exception, that really means that “the size of planned spending increases that were originally reduced were put back into place.”

3. Ohio’s economy is still significantly lagging the rest of the nation.

Ohio’s unemployment rate of 6.1% is a full point above the national average (the link also has figures for all Ohio counties and major cities). Dayton, Canton, Youngstown, and Cleveland all have unemployment rates of over 7%.

Of course, state Democrats are crying that we should be spending more, making the leadership void complete.

Isn’t it obvious how these three news items are related?

UPDATE: Michael Meckler reports that Tom Brinkman, who I supported in the just completed Special GOP Congressional Primary, was one of eight Republicans who voted against it, which explains why I voted FOR Brinkman last Tuesday.

UPDATE 2: Weapons of Mass Discussion weighs in. Also told WMD in a comment that when (thanks to the ongoing impact of the Bush tax cuts) the state starts building a surplus it should repeal the CAT immediately.

UPDATE 3: Porkopolis notices that the full effect of the 21% income tax decrease won’t be in place for 5 years (I thought most of the reduction would occur this year).

So, when the revenue windfall comes in, The CAT should be repealed, and the 2009 tax tables should be put into place–effective January 1, 2006, or earlier.


1 Comment

  1. Ohio Budget Passed

    Republicans still can’t seem to draw the connection between the business climate in this state and our lagging economic performance. What good is a tax cut of 21% if we don’t have secure jobs?

    Trackback by Weapons of Mass Discussion — June 23, 2005 @ 10:12 am

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