OHIO BUSINESSES Report: Funds fall short from tax code

Millions of dollars in potential revenues was lost in 2003 alone.
CLEVELAND (AP) -- A patchwork of tax breaks, loopholes and special deals is keeping many corporate tax bills low in a state with a reputation for levying high taxes on businesses, The Plain Dealer reported Sunday.
"People look at us and say you're a high-tax state," said state Rep. Sally Conway Kilbane, a Rocky River Republican who has studied tax reform since 2002 and has twice proposed a business-tax overhaul. "And yet, in terms of revenues, they're not there."
The share of the corporation franchise tax, the main business tax, as an overall contribution of the state's taxes has fallen from 16.3 percent in 1972 to 4.3 percent in 2003. Records show a greater tax burden has been shifted to income, sales and use taxes.
Six companies with billions of sales in the United States and an average of $650 million in Ohio paid just $50 apiece in corporation franchise taxes in 2001.
In 2002, close to half of the 101,000 nonfinancial companies subject to the corporate franchise tax in Ohio paid $50, according to the state tax department. Another 35,000 companies paid $2,000 or less, no more than a family of four with income of about $63,500.
What projections show
State tax projections show the state lost about $480 million in potential corporation franchise tax revenues for 2003 because of credits, exemptions and other breaks. Total franchise tax revenues that year were $808 million.
Gov. Bob Taft has tried to overhaul the tax system and get more big corporations to pay their fair share.
But the Legislature rejected his reform and, in the process, kept what is basically a tax code so tangled that it routinely inspires conflicting claims about the state's tax climate, The Plain Dealer reported in the first day of a two-day series on the state's tax system.
Business leaders regularly say that high business taxes stifle growth and keep companies from expanding or moving to Ohio. Policy analysts suggest that Ohio usually falls in the middle of the states, and a Plain Dealer analysis suggests both arguments could be true depending on what part of the state a business is located.
Businesses also complain about taxes on machinery, equipment and inventory that raised $1.77 billion in 2002 before abatements.
"We are one of the worst taxing states on both individuals and corporations," said Mal Mixon, chairman and chief executive of Invacare Corp. in Elyria.
Where state stands
Ohio is last in jobs created since 2000 and accounts for nearly 20 percent of all American job losses since the recession. Budget problems have led to huge cuts in services and the next two-year budget for the state could have a shortfall of up to $4 billion.
A hostile tax climate plays a large role, said Mark Filippell, a managing director at Western Reserve Partners LLC, a newly formed investment bank in Cleveland.
"We do not have enough world-class universities around here," he said. "We do not have an especially well-educated labor force. So the taxes are just more and more reason not to be here."