Government

Ohio Chambers Tell Kasich His Budget Hurts Business

COLUMBUS, Ohio — The Ohio Metro Chamber Coalition says Gov. John Kasich’s proposed state budget will adversely affect business.

In a letter to Kasich, sent last week, the coalition cites a study it commissioned last month that reviewed key components of the budget proposal. The study found significant problems with the tax reform proposal that, if enacted, could stall Ohio’s recent economic rebound, the coalition said, and fail “to boost economic competitiveness of Ohio.”

The coalition is composed of the Ohio Chamber of Commerce and eight of Ohio’s largest metropolitan chambers, including the Youngstown Warren Regional Chamber. In announcing its position, the letter to Kasich was not released by the coalition.

“As currently proposed, this is not the right tax plan for Ohio,” said Joe Roman, CEO of the Greater Cleveland Partnership and chairman of the Ohio Metro Chamber Coalition, in a prepared statement. “Raising and expanding taxes on Ohio employers may make the state a less competitive place to do business.”

A major concern is the proposal to increase the Ohio’s commercial activity tax, a gross receipts tax in place for 10 years. Typical problems with a gross receipts tax were largely muted as a result of low rates, which was the intention of the parties who enacted it a decade ago. Increasing CAT rates by 23%, as proposed, could trigger significant economic consequences for Ohio employers, the coalition warned.

“We need to do everything we can do to encourage our businesses to stay in Ohio and grow in Ohio,” Roman said. “Recent economic strategies confirm that the right growth opportunities for Ohio should be focused on helping to retain and expand our businesses. Increasing and expanding taxes on our employers may make it more difficult for Ohio’s businesses to thrive and expand. It makes it harder for them to retain and create jobs.”

According to the study the coalition commissioned, gross receipts taxes generate significant amounts of revenue at low tax rates because they essentially tax every transaction in the economic chain of bringing goods and services to market, irrespective of the intermediate nature of the transaction or the profitability of the entity. This results in tax pyramiding, whereby the effective tax rate increases as a result of multiple transactions in bringing a good or service to the consumer.

“The burden of this pyramiding outcome is felt differentially across industries and consumers, and has potentially significant economic consequences,” the study states. “What appears as a very small rate change is magnified in its effect.”

The report also warns about the negative economic effect that could occur if the state adopts the governor’s proposal to expand the sales tax to many more Ohio businesses.

Expanding the sales tax to include more Ohio businesses may make them less competitive with out-of-state companies. Ohio businesses may also attempt to pass these higher costs along to consumers.

“Expanding the sales tax base, particularly on business services, may very well harm Ohio companies,” said Phillip Parker, CEO and president of the Dayton Area Chamber of Commerce and vice-chairman of the Metro Chamber Coalition. “It could result in a substantial tax increase for many businesses.”

As noted in the study, the business sectors most impacted by the proposed tax include manufacturing, finance/insurance and health care industries, Parker said.

SOURCE: Ohio Metro Chamber Coalition.

Published by The Business Journal, Youngstown, Ohio.