Major changes to Ohio’s tax systems were enacted with passage of a new budget during June. 

Beginning immediately, there will be no property taxes on investments in new industrial machinery and equipment. This serves as an example of the tax changes which will position us to more effectively market Ohio for job retention and growth. 

Other parts of the plan are scheduled to phase in over the next four or five years. These changes are based on several years of public and private sector preparation. They have very strong leadership support from executive, legislative and many business leaders.

A useful way to get a perspective on how this plan will interact with future budgets involves modeling anticipated yearly growth in state tax revenues in the four to five percent range. It uses a 5.5% sales tax rate for both cases. Without tax reform state tax revenues would grow by about $5 billion over the next five years. The tax reform package diverts $2.5 billion of this growth to state and local tax cuts, leaving $2.5 billion to sustain education, health care and other governmental services. 

When fully implemented the plan amounts to an annual net tax cut of about $1.3 billion below revenues that would be expected from the old tax system under the previous 5% sales tax rate.

On a cumulative basis the net tax cuts are expected to yield $8.3 billion to the benefit of taxpayers between now and June 30, 2010.

Once fully phased in, in the fifth year, this tax package will reduce or eliminate three of Ohio’s most anti-competitive taxes by $4.3 billion, while helping to maintain services by providing $3 billion in replacement revenues from consumption-related taxes.

At full strength, in the fifth year, taxpayers would benefit by:

·        Cutting personal income taxes 21% across the board ($2.1 billion);

·        Ending corporate franchise taxes ($790 million);

·        Ending all tangible personal property tax on businesses, including machinery, equipment, inventory and furniture and fixtures ($1.5 billion).

Replacement taxes, together with fifth year revenue estimates, would:

·        Initiate a new commercial activity tax on most business gross receipts above $1 million, but only on activity with Ohio-based customers. This will phase up over five years to a rate of .0026 of gross receipts above $1 million,  expected to yield $1.5 billion per year for use to mostly replace school and local government losses from eliminating personal property taxes;

·        Replace the temporary 6% sales tax rate with a permanent 5.5% rate, which will generate about $846 million less than last year;

·        Repeal the real property tax 10% rollback that the state has provided businesses ($365 million per year);

·        Increase various consumption taxes (totaling $600 million per year).

Ohio is positioning itself to be more competitive in world markets by removing taxes on business investment in equipment and inventory, by repealing the income tax paid by C-corporations and by lowering the state personal income tax by 21% to make Ohio rates more competitive.

 These changes will improve the economic environment and give Ohio powerful marketing tools to grow the state economy, which in turn will help generate jobs and expand our tax base, help Ohio workers support their families and provide resources to education, Medicaid and other public services.