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OHIO DEVELOPMENT Officials fear loss of tax incentives



Published: Fri, April 18, 2003 @ 12:00 a.m.



An East Liverpool lawmaker will have a close look at the tax-reform bill.

THE VINDICATOR, YOUNGSTOWN, OHIO

By JEFF ORTEGA

VINDICATOR CORRESPONDENT

COLUMBUS -- Economic development and business officials say they're worried about the possible rollback of state tax incentive programs, saying their elimination could cripple efforts to lure job-producing businesses to the Buckeye State.

"We don't offer incentives because we like to give the state's tax base away," said Bruce Johnson, state department of development director. "We do it because we have to."

As part of proposed reforms to the state's tax laws, state lawmakers are considering eliminating the state's taxes on most companies' inventory and machinery in favor of another more broad-based tax.

But doing away with those taxes could eliminate the state incentive programs that are based on those taxes such as the Ohio Job Creation Tax Credit, the Manufacturer's Machinery and Equipment Investment Tax Credit and the Training Tax Credit.

Tax credits

The job creation tax credit provides assistance against a company's corporate franchise or state income tax to expand or relocate to Ohio.

The manufacturer's machinery and equipment credit provides a nonrefundable corporate franchise or state income tax credit for an Ohio manufacturer that purchases new or retooled machinery and equipment.

The training tax credit provides assistance for employers that train employees who are at risk of losing their jobs primarily because of skill deficiencies.

"If you eliminate that ... we think that would be a significant problem," Johnson said Tuesday. "It would have a dramatic impact on the economy."

Bill's provisions

Under a comprehensive tax-reform bill pending in the House Ways and Means Committee, property taxes paid by businesses on equipment and machinery would be replaced by a so-called "factor" tax that would be based on sales and business property and payroll.

The bill also would do away with the net-worth measure of corporate franchise tax for all corporations except financial institutions and public utilities effective with the 2005 tax year, a bill summary said.

The GOP-controlled House folded some of the reforms related to the state's sales tax into the recently passed, two-year $48.7 billion budget bill now pending in the Senate.

But the bulk of the tax-reform measure remains in the House committee for further study, Republican House leaders said.

Blasdel's stance

State Rep. Charles Blasdel, an East Liverpool Republican and a ways and means committee member, said the proposed changes to the state's inventory and machinery taxes make sense.

"The reason we need abatements is we have an archaic tax code," Blasdel said. "The idea is if you do away with the tax, you don't need the abatement."

The equipment and machinery tax hurt businesses, Blasdel said.

"It's very detrimental for investment," Blasdel said. "What you're doing is penalizing people for making capital investments in Ohio."

GM plant

A failure to keep the tax-incentive programs will impact efforts to retain large-scale businesses such as the sprawling General Motors Assembly Plant in Lordstown.

State assistance for the Trumbull County plant include a $37 million machinery and equipment tax credit and a $20 million business development grant.

The Senate Finance and Financial Institutions Committee takes up the proposed state budget next week.




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