What's the Status of Implementation?
Ohio is more than halfway through the fi ve-year implementation of the 2005 tax reforms. Here's where we are today: 2008 will be the last year most business owners pay tax on tangible personal property such as inventory, equipment, furniture and fi xtures, which will be assessed for tax purposes at 6.25 percent of true value this year, down from 12.5 percent in 2007. In 2009, the assessment rate will drop to zero for most businesses. The corporation franchise tax has been reduced by 60 percent from 2005 levels and will be fully eliminated by 2010. In 2008, all individual taxpayers in Ohio are paying 16.8 percent less in personal income tax compared to 2004 rates, on the way to a 21 percent reduction by 2009. The CAT continues to be phased in to partially offset revenue loss from the phase out of the corporation franchise tax and tangible personal property tax. So far, the broad-based, low-rate CAT has exceeded expectations. The number of entities paying the CAT has been roughly what was expected, while the revenues generated by the CAT generally have been higher than forecasted. For example: CAT revenues for FY 2006 exceeded original estimates by $59 million, or 27.5 percent. CAT revenues for FY 2007 exceeded original estimates by $88.3 million, or 17.4 percent. For FY 2008 to date (through March), CAT revenues were about $17.5 million below estimates. State Budget Offi ce projections for CAT revenues through FY 2011 are considerably higher than the original HB 66 estimates.
RetoolingOHIO
Are the Reforms Working?
The reforms are still being phased in, so it's too soon to determine their full impact on Ohio's economy, but there are many indications that the changes are working as intended. Here are some economic highlights of where we are today: In a recently released ranking of per capita state tax burden by the Federation of Tax Administrators, Ohio fell to 38th lowest in the nation-a signifi cant improvement over our ranking of 27th in 2005. Ohio's per capita tax burden is now lower than any of our contiguous states. According to the Ohio Business Development Coalition, Ohio is on track to offer the lowest effective tax rates on capital investments anywhere in the Midwest by the time the 2005 reforms are fully implemented in 2010. Site Selection Magazine has awarded Ohio its Governor's Cup for two years running (2006 and 2007) for leading the nation in the number of new business expansion and construction projects. From 2005 through 2007, The Ohio Department of Development identifi ed 1,585 major private projects 1 , representing almost $17 billion in investment and expected to create more than 62,000 jobs. More than half of these investment projects involve manufacturing operations. How important were Ohio's recent tax reforms in businesses' investment decisions? In August 2006, the Ohio Business Development Coalition commissioned a survey of executives from companies that chose Ohio for capital investment. Sixty percent of top-level executives indicated that Ohio's new tax structure was a "somewhat to very important? factor in their decision-making. 1 To qualify, a project had to meet one of three criteria: (a) minimum investment of $1,000,000, or (b) at least 20,000 square feet, or (c) job creation of 50 or more. Projects must be classifi ed as Manufacturing, Distribution, Offi ce or Research & Development.
Tax Reform at Work: Just a Few Examples
After acquiring rival Maytag, Whirlpool Corporation set out to consolidate its laundry manufacturing operations. The 2005 tax reform made the business climate in Ohio more attractive for the company, its suppliers and its employees. Consequently, the decision was made to add more than 1,000 employees and invest tens of millions of dollars in Ohio. The improved tax environment was one of the signifi cant factors in moving jobs from other states into Ohio, rather than moving Ohio jobs to other states! Less than six months after passage of HB 66 and its historic package of tax reforms, Amylin Pharmaceuticals announced plans to establish a new production facility in West Chester (Butler County)-a $150 million investment that would create 50 new jobs in the fi rst three years. The recent tax reforms were cited by company leaders as one of the "favorable infl uences? on their decision to invest in Ohio. Since then, Amylin has announced plans to add a packaging plant to its West Chester facility-a projected $400 million investment that is expected to create 500 new jobs over three years with average salaries in excess of $50,000 per year. In March 2006, Polymer Packaging Inc. announced plans for a $20 million expansion of its manufacturing operations in Stark County. The plans included the addition of new manufacturing equipment and capabilities, relocation to a new 72,500-square foot facility and construction of an additional 10,000 square feet to accommodate corporate offi ces and R&D labs. Overall, the expansion was expected to create at least 50 new jobs. Company offi cials acknowledged publicly that the tax reforms contained in HB 66 were one reason Polymer Packaging chose to remain in Ohio rather than moving closer to its customers on the West Coast.
