Tax cuts and breaks helped Ohio land jobs, study finds

5/4/2009

Although critics of sweeping tax changes enacted four years ago bemoan the loss of state revenues with limited results, a new study concludes that those changes have improved Ohio's ability to compete with other states for new jobs.

In fact, an analysis as part of a comprehensive review of the tax incentives that Ohio offers for new economic development concludes the tax changes have increased the state's competitiveness with selected states by up to 20 percent.

"Without question, (tax reform) changed the competitive landscape in favor of Ohio," the final report from the study, released today, says.

As Mark Barbash, the interim state development director, put it: The tax changes "put Ohio back in the game for the most competitive projects."

But the study also raised concerns about the tax-incentive programs the state uses to lure jobs and made a host of recommendations for changes, including revamping how the state tracks and reports results.

State officials admitted last fall that was a problem after The Dispatch reported that although the state has given companies more than $1.7 billion in tax breaks and other incentives during the past decade with the promise of nearly 200,000 jobs, no one could say how many jobs actually were created.

In 2005, whenRepublicanBob Taft was governor,the state slashed income-tax rates by 21 percent over five years, eliminated its tangible-personal property tax and made other changes to make Ohio's business climate more attractive.

The study calculated the tax costs and value of the incentives that Ohio could offer to businesses before and after the tax changes, then compared Ohio with the contiguous states of Michigan, Indiana, Kentucky and Pennsylvania plus Alabama and North Carolina, two states with which Ohio competes heavily for projects.

The analysis noted there are limitations with such a comparison but concluded Ohio fares better against most states after the changes.

Critics complain that changes have been in effect for four years and business taxes have been dramatically reduced, yet the state continues to hemorrhage jobs.

"There's little evidence that the tax changes have led to meaningful economic improvement in Ohio," said Zach Schiller, research director for Policy Matters Ohio and a member of the advisory task force that participated in the study.

Supporters of the tax changes, including Democratic Gov. Ted Strickland, argue Ohio's economic conditions would be worse without the changes.

The study's recommendations include ways to make the state's programs for loans, Job Creation and Job Retention Tax Credits, workforce development, and local tax abatements less complex and faster to implement.