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Published: Wednesday, 6/8/2005

Ohio House rejects budget changes

BY JIM PROVANCE
BLADE COLUMBUS BUREAU

COLUMBUS - Ohio's proposed new tax on business gross sales was supposed to be as broad as possible with few exemptions like those that punched gaping loopholes through the corporate franchise tax.

But even before the new Commercial Activity Tax collects its first dime, lawmakers are carving out exemptions, including one that the Toledo-Lucas County Port Authority said will place it at a competitive disadvantage when it comes to marketing its federally recognized foreign trade zone.

"The greatest criticism with the corporate franchise tax had to do with high rates and low collections," said House Minority Leader Chris Redfern (D., Catawba Island). "We're going down the same path with the [Commercial Activity Tax], a flawed tax to begin with."

The House yesterday rejected the changes the Senate made in the $51 billion, two-year budget, setting up a joint conference committee to work out more than 500 differences.

The committee will meet tomorrow, keeping fingers crossed that it will receive rosier revenue estimates for the next two years.

Among the issues to be resolved are how to distribute billions in aid to schools and nursing homes, whether to tax cigarettes or alcohol or both, and how to regulate Bureau of Workers' Compensation investments.

The foreign trade zone exemption would exclude sales of goods delivered into and assembled within a zone that includes a transshipment station capable of handling freight by rail, highway, and air.

Sen. David Goodman (R., Bexley) said the language was tailored to apply only to Rickenbacker Airport, a major cargo hub south of Columbus.

"This is a facility like no other in relation to the size of its runway and the kind of traffic it can handle," he said. "We've invested millions in the infrastructure to make it an intermodal facility with trucking, rail, and air opportunities to make Ohio the destination highway for the entire country."

Lawmakers said the language began in the House as an attempt to protect Cardinal Health, which has a warehouse at Rickenbacker. It evolved in the Senate as a general protection for Rickenbacker.

Mr. Goodman said he sees the language as an extension of government special treatment for foreign trade zones. Goods and parts may be shipped into the zones from outside the country and assembled for resale, with federal duties paid only on finished products.

The federal government imposes lower excise taxes on such goods and Ohio has exempted business inventory within the zones from its tangible personal property tax.

That tax and the corporate franchise tax are slated to be gradually replaced with the new gross-receipts tax.

That would end the inventory tax incentive.

"We would like to be able to offer tenants of our FTZ a CAT tax exemption," Toledo-Lucas County Port Authority spokesman Brian Schwartz said. "If that's not possible, we would not be disheartened if no one had the exemption. Rickenbacker would be able to market something we will not be able to market, and we compete with Rickenbacker."

In addition to Toledo and Columbus, there are general-purpose foreign trade zones in Cleveland, Dayton, Cincinnati, Clinton County, Findlay, and Akron-Canton.

Among other changes, the Senate raised the threshold at which businesses begin to pay the tax to $200,000 from the $40,000 proposed by Gov. Bob Taft and the House.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.



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