TAX CODE RESTRUCTURING

Historically, a high tax burden has been imposed on business capital investment in Ohio through the tangible personal property (TPP) tax on machinery, equipment, inventory, furniture and fixtures. Job creation has also been stifled by high personal income tax rates, particularly on business owners, entrepreneurs and upper-level executives who have substantial influence in deciding where a company locates or expands. In sum, high state and local taxes have played a significant part in impeding the ability of Ohio businesses to grow and costing the state an incalculable number of employers looking for a place to expand. The Ohio Chamber has long advocated updating the state tax code to spur new investment and economic growth, make Ohio communities and companies more competitive and create and retain jobs. These advocacy efforts met with considerable success with the passage of HB 66, the state’s FY 2006-07 biennial budget bill, which also contained a comprehensive restructuring of state tax laws. The legislation included two key components strongly supported by the Ohio Chamber – elimination of the TPP tax over four years and a substantial reduction (21 percent) in personal income tax rates over five years. Although the Chamber put forward an alternative framework that would have revised the corporation franchise tax, the General Assembly opted to enact a new commercial activity tax (CAT). The CAT was the centerpiece of Gov. Bob Taft’s tax reform plan and is based on a corporation, partnership or sole proprietor’s gross receipts or sales made in Ohio without regard to the company’s profit or income. Toward the end of the legislative process, the Ohio Chamber outlined six important changes deemed necessary to significantly improve the tax reform package. Four of those recommended changes were ultimately incorporated into HB 66, including reinstatement of the TPP tax exemption for patterns, jigs, dyes & drawings; relief for companies having unused, prior-year net operating losses beyond the phase-out period of the corporation franchise tax; allowance of a shorter phase-out period for the furniture & fixtures component of the TPP tax; and, elimination of the proposed 30 percent increase in the kilowatt-hour tax.

WORKERS’ COMPENSATION REFORMS

Controlling the costs associated with Ohio’s workers’ compensation system has been a top priority for the Ohio Chamber since the early 1980s. Numerous Ohio Supreme Court decisions since 1990 have led to many revisions of Ohio workers’ compensation laws that have been costly for Ohio employers. The Chamber has been successful in chipping away at a few of these bad decisions in recent years, with legislation addressing single issues. During the 126th General Assembly, the Ohio Chamber is leading the efforts to pass SB 7, a strong comprehensive workers’ compensation reform bill. The Senate passed SB 7 on June 2, 2005, but the House has yet to act on the bill. SB 7 would help ensure that Ohio’s workers’ compensation system is more efficient and effective today, tomorrow and in the future. The reforms contained in the bill will make the system more predictable and bring Ohio in line with systems in other states. The Ohio Chamber will continue to work with House members to enact the comprehensive reforms contained in SB 7 when legislators return from the summer recess.

UNEMPLOYMENT COMPENSATION REFORMS

As Ohio’s unemployment levels remain higher than the national average, the cost of adequately funding benefits for its unemployed population continues to increase. To ensure individual employers don’t pay more than necessary, the Ohio Chamber has worked closely with the state unemployment compensation agency staff and legislative leaders to use available resources to build a cost effective system. Unfortunately, a growing trend nationally called “SUTA dumping” (State Unemployment Tax) has begun to artificially increase the cost of unemployment compensation. Supported by the Ohio Chamber, SB 81 was introduced in response to the federal “SUTA Dumping Prevention Act of 2004.” This SUTA dumping law requires states to enact legislation to prohibit the manipulation of payroll information and/or business transfer information to improperly lower SUTA rates. The price tag of “SUTA dumping” is spread across every employer and unnecessarily drives up the cost of doing business in Ohio. SB 81 was signed by Gov. Bob Taft on June 3, 2005, and became effective on September 2, 2005.

HEALTH CARE LEGISLATION

The Ohio Chamber has continuously advocated for more options and competition in the health insurance field. On August 17, 2005, the Governor signed HB 193. A key provision of this bill, supported by the Ohio Chamber, will conform Ohio insurance regulations to federal law and allow Health Insuring Corporations to offer high deductible insurance products when coupled with a Health Savings Account. This will expand the range of options available to Ohio employers in their continuing quest for cost-effective, consumer-driven health insurance coverage. The Ohio Chamber has been the leading voice against legislatively mandating insurance coverage for specific treatments. These advocacy efforts are critical because even in the face of spiraling health care costs, insurance mandate bills are still being introduced in the legislature. The Ohio Chamber will continue to work to defeat these costly health care mandates during the remainder of the 126th General Assembly.

PROTECTING SMALL BUSINESSES

Ohio has been working with other states through the Streamline Sales Tax Project (SSTP) to simplify sales tax compliance across the country, particularly for companies that do business in multiple states. One of the changes Ohio must make is especially burdensome to small businesses - a requirement for destination-based sourcing on delivery sales. The Ohio Chamber and the Ohio Small Business Council (OSBC) strongly urged that small businesses be given more time to comply with this new requirement. The concerns raised by OSBC were addressed in SB 26, which was signed by the Governor on June 2, 2005. The bill gives companies with less than $5 million in taxable delivery sales, until January 1, 2008, to comply with the new destination-sourcing requirement.