Some businesses say plan by Taft would be a burden
The five-year plan would eliminate a tax on business equipment and inventory.
COLUMBUS (AP) -- Businesses with a high sales volume but low profit, such as wholesalers who supply convenience stores, worry that they will take on more of the state's tax burden under an overhaul Gov. Bob Taft proposed Tuesday.
Manufacturers and other trade groups who have clamored for Ohio to tax more businesses at a low rate got their wish: Taft's 5-year tax plan calls for phasing out Ohio's main business tax and a tax on business equipment and inventory, replacing them with a 0.26 percent tax on in-state revenue. He also proposed a 21 percent cut in income taxes, which affect some companies as well as individuals.
Businesses across the state praised the ideas but said they'll be checking their calculators over the next few weeks.
"We certainly like the direction Governor Taft took in his speech," said Ed Miller, spokesman for Marysville-based Honda of America Manufacturing. "It would help us and everyone if the business climate were improved generally."
Tax relief is crucial to Akron-based Goodyear Tire & amp; Rubber Co. and others facing competition from foreign manufacturers without the same kind of taxation, spokesman Ron Maulsby said.
But they and other manufacturers hadn't yet figured out how the declining equipment and corporate taxes would be balanced by the new tax on revenue.
Even groups subject to new taxes -- accountants, attorneys and doctors in for-profit practices -- hadn't yet decided if they like the idea. Professional services were exempt from the corporate tax but would have to pay the new revenue tax. However, they also would benefit from the income tax cut.
"It really depends on how the math works out, but oftentimes it's going to end up being a wash," said Jim Taylor, a certified public accountant of GBQ Partners LLC in Columbus. However, in the long run if the tax is greatly simplified, it might mean less business for accountants, he said.
Many businesses are likely to break even or even see a tax reduction, said Fred Church, Ohio's deputy tax commissioner for research and legislation.
"That's one of the reasons the income tax cut is as large as it is," he said. "There will be some folks for whom it's not true."
Among the losers could be about 40 small Ohio businesses who supply convenience stores with cigarettes, soft drinks, chips and other merchandise, said Beth Wymer, executive director of the Ohio Wholesale Marketers Association.
About 70 percent of their sales volume is cigarettes, and Taft has proposed raising the tax to $1 a pack from the current 55 cents. That will cut business as people quit or buy smokes from other states or the Internet, Wymer said. Then the wholesalers add the burden of the new revenue tax for a low-profit business.
"We will see some wholesalers close up because of it," she said. "I thought the whole idea was to bring jobs to Ohio, not lay people off."
Farmers also could be affected, because they have high sales with low profits, but the Ohio Farm Bureau is still calculating if the income tax cut would offset that, legislative affairs director Rocky Black said.
Some may disagree with a shift to sales instead of profits, but a revenue tax more accurately reflects the state services a business uses, Lt. Gov. Bruce Johnson said.
"It makes no sense to penalize someone for being profitable," he said.