STATE BUDGET Tax plan is business-friendly, Taft asserts

The governor's proposal cuts personal income tax by 21 percent in five years.
YOUNGSTOWN -- Gov. Bob Taft said his five-year tax plan will make the state more attractive to companies looking for business locations and help retain those already here.
In a Friday telephone interview with The Vindicator, Taft said he had to propose a major tax package because unlike other states, Ohio is struggling to get out of a recession.
"Our tax structure is a real handicap when we're competing for jobs," he said. "We have one of the highest tax structures in the country."
Taft's plan calls for phasing out Ohio's main business taxes -- corporate franchise tax, the machinery and equipment tax -- and replacing them with a 0.26 percent tax on in-state revenue. The state would provide $390 million over the next two years to school districts and local governments to replace money lost as the tax on machinery and equipment is phased out.
"That tax is enormous, and we're competing against some states that don't even have it," Taft said.
Other tax changes
The governor is also proposing a 21-percent across-the-board personal income tax cut over five years, and immediate elimination of tax liability for those making $10,000 or less annually. Taft says the state's personal income tax is one of the highest in the nation, and hurts Ohio's ability to compete with other states.
The governor wants to increase the cigarette tax by 45 cents, bringing the per-pack tax to $1, increase tax on other tobacco products from 17 percent to 30 percent, and double the tax on alcoholic beverages. Taft also wants to increase the kilowatt-hour tax on electric consumption by 30 percent.
The Ohio House and Senate are considering Taft's tax bills.
The tax reforms are part of Taft's proposed $51 billion two-year state budget. Taft expects the House to adopt the major aspects of his proposal in mid-April, the Senate about a month later, and he would sign the bill into law in late June.
"It's a tough and tight budget," he said. "We're working hard to sell our plan. We think it's a good plan to help the state."
But Taft said his working relationship with the current leaders of the state Legislature is much better than in the last session. That should make it easier to get most of the proposals approved, he said.
Taft said 5.3 million Ohio taxpayers would see a personal income tax cut under his plan, with 550,000 low-income residents having their tax burden eliminated. The average Ohio family of four would see their state tax burden decrease by $555 annually, he said.
Also, 13,000 Ohio businesses wouldn't pay machinery and equipment tax.
Pitching the plan
Taft spoke to the newspaper after presenting his proposal Friday to about 40 members of the Youngstown-Warren Regional Chamber's board, members of its governmental affairs council and prominent chamber members. The invitation-only lunch was held at the Squaw Creek Country Club in Vienna.
Greg Sherlock, the chamber's vice president of governmental affairs, said those in attendance had many questions and some concerns. But overall, the group was receptive to Taft's proposals, and will issue a resolution shortly on it.
Sherlock said the proposal isn't perfect, but most chamber members support it.
"It's a step in the right direction," he said.
State Sen. Marc Dann of Liberty, D-32nd and a local chamber member, wasn't at Friday's meeting. But Dann and other Senate Democrats don't support Taft's plan.
Helping small businesses create jobs is one of Taft's goals, but Dann said cutting personal income tax rates by 21 percent over 5 years -- or a little over 4 percent annually -- isn't enough.
"Gov. Taft has proposed to reduce income taxes on the premise it will create jobs," Dann said. "But his own research demonstrates the opposite. We propose targeting that tax cut to the small business owners who reinvest their tax savings in Ohio businesses."
Dann also sent a letter last week to Youngstown-Warren chamber members saying Taft's plan wouldn't reach its full effect until 2010, four years after he leaves the gubernatorial office.
"Instead of embracing a responsible, fairer tax system for business, the governor is proposing a risky scheme and escaping its consequences," Dann wrote.
Dann wanted to speak to the chamber's board about Taft's tax plan but was denied that opportunity.
"The governor's plan looks like it's on the fast track," Sherlock said. "We respect the senator's vision, but we respectfully decline at this time to hear it."