'Activity tax' proposed for Ohio's firms

4/16/2004

COLUMBUS - A key Republican lawmaker yesterday released a proposal for a new Ohio business tax that would replace the corporate franchise tax and tangible personal property tax.

"We're trying to create a tax system that is fair, transparent, and easy to comply with so that business decisions can be made for economic reasons, not tax reasons," said state Rep. Sally Conway Kilbane (R., Rocky River), chairman of the House Ways and Means Committee.

Ms. Kilbane's proposal would enact a "business activity tax" with a three-part base: a company's Ohio sales, property, and payroll. The tax rate would be 0.71 percent, and sales would be weighted three times more heavily than property and payroll.

The lawmaker said the change would expand Ohio's business tax base from about $9.5 billion to at least $200 billion. It is designed, however, to not have any net increase or decrease in business tax revenue collected, said an aide to House Speaker Larry Householder (R., Glenford).

Last year, several businesses, including Toledo's Owens-Illinois Inc. objected to a proposal dubbed a "factor tax " that would have replaced the tangible personal property tax and removed the option of calculating the corporate franchise tax based on net worth. The plan never received a committee vote.

The Ohio Chamber of Commerce has not taken a stance on Ms. Kilbane's proposal, but the group has several concerns, said Dan Navin, the chamber's lobbyist and tax expert.

"There's a substantially higher tax base when you add in sales and you add in payroll," he said. "We are uncertain what the long-term and short-term impact will be on companies that have made substantial investments in Ohio."

About 70 percent of the $1.9 billion raised each year by the tangible personal property tax flows to local school districts, according to the nonpartisan Legislative Service Commission.

Ms. Kilbane said if her proposal becomes law, districts would not lose money for three years and the aid would be phased out over 12 years, in part by the state eliminating the 10 percent property-tax rollback for businesses.

The legislation, she said, would not apply to public utilities, financial institutions, and insurance companies. Her committee is expected to start reviewing it next week.

Contact James Drew at:

jdrew@theblade.com

or 614-221-0496.