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Governor Takes Campaign for Tax Reform to Youngstown
"By Dennis LaRue YOUNGSTOWN, Ohio -- Using City Machine Technologies Inc. as a backdrop, Gov. Bob Taft came here Wednesday in his campaign for tax reform that would reduce taxes on the state's manufacturers and personal income taxes by 21% over five years.The governor's proposed tax reform would spread the revenue generated from the state's businesses over more enterprises. It would phase out the corporate tax and taxes on equipment and inventory over five years and replace them "with a broad-based, low-rate commercial activity tax."The sums generated from the taxes Ohio business pay would be "revenue neutral," Taft said. It would not shift any of the burden businesses pay to consumers.In trying to make the system fairer and simpler, taxes reduced in some areas would be offset by increases in other areas, the governor allowed. For example, Taft's plan would reduce personal income tax rates by 21% over five years but increase taxes on tobacco, alcohol and electricity.It would also eliminate the personal income tax on Ohioans earning $10,000 a year or less. Ohio's tax system is "uncompetitive and out-of-date," the governor told a small number of CMT employees as reporters listened and watched in the company's lunchroom. CMT, 20 years old, has 77 employees in three sites. The top rate of 7.5% on personal income, Taft noted, is well above the top rates in neighboring states. Pennsylvania's personal income tax has a flat rate of 3.07%, Indiana 3.4% and Michigan 3.95%.The corporate tax and tax on tangible personal property unduly burdens small businesses with plants only in Ohio. Larger enterprises, Taft said, have accountants who know how to shift income to states with lower rates. "It's not fair,' he declared. "Small companies can't shift income out of state."Most states have abolished the tangible personal property tax, the governor said, and Ohio's corporate tax, at 8.5% is one of the highest in the United States, deterring businesses from moving here.The governor's reforms would generate $800 million less over the next biennium than by maintaining the present system, the governor said. Regardless, the budget will be balanced (as required by the state constitution) and because of austerity measures the governor proposes.The governor's budget, if adopted, "is the tightest presented in Ohio in 40 years," a Taft spokesman says. In his budget, Taft listed several cost-cutting measures effected:A cut of $1.4 billion from authorized spending levels.A reduction of 3,000 in the number of state employees.A reduction in the state vehicle fleet of 12%.A reduction of $863 million in Medicaid in this biennium. Of his budget, Taft writes, "Medicaid is the single-largest program in the state budget, with recommended GRF [general revenue fund] appropriations in fiscal 2006 of $9.6 billion (0.0% above fiscal 2005) and $9.9 billion in fiscal 2007 (3.6% above fiscal 2006). These appropriations include the federal share of the program, which makes up approximately 60% of the total, and funding for Medicare Part D." Taft's budget may be the tightest in decades, but the governor told CMT employees that it will increase state spending by $260 million in 2006 to $25.4 billion, a 1.1% increase, and $450 million in 2007, a 3.3% increase over projected 2005 spending. Half of the "temporary" 1% increase in the state sales tax will remain under tax reform, Taft said, to balance the budget. That half-percent is needed to offset the 21% reduction in the personal income tax, he explained. While smokers can't fail to notice the increased prices on cigarettes and beer, the increase on residents' electric bills would come to $1.40 a month on average, somewhere above $14 a year, Taft said, assuming consumers take no conservation measures. The increased tax on a six-pack of beer would be about a dime, he said.Visit the State of Ohio Office of Budget and Management at www.obm.ohio.govContact Dennis LaRue at [email protected]"