Republicans propose phasing out Ohio's main tax on businesses
The Commercial Activity Tax was created by Republicans under Gov. Bob Taft in 2005, and raises more than $1.7 billion a year.
A Republican-sponsored bill would get rid of Ohio’s main tax on businesses, in place for 16 years. And though most companies don’t bring in revenue enough to pay that tax, but it still raises nearly $2 billion a year.
The commercial activities tax was created in 2005 to replace the tangible personal property tax. It's .26% on annual gross receipts over $150,000. Just under 65% of businesses don't pay the CAT, according to the Ohio Department of Taxation. Companies that have taxable gross receipts of over $1 billion are only .1% of all businesses that file, but they pay 24.5% of the total CAT tax.
House Bill 234 would phase it out over five years by reducing it by 20% each year. The bill has had one hearing so far.
Greg Lawson with the conservative Buckeye Institute has advocated cutting the CAT, especially as the state has moved away from income taxes and toward sales and consumption taxes.
“There's ways of doing it with revenue. If you bring in a certain amount of revenue, you can lower the rate a certain amount as the revenue comes in and freeze it at a certain point if the revenue drips below a certain amount," Lawson said. "So there's ways to do it responsibly. It's not like just pulling the rug out.”
Lawson also pushed spending cuts and closing loopholes, which the progressive research group Policy Matters Ohio has also backed.
But they’ve suggested reinvesting the tax savings and replacing the CAT with a corporate income tax.
But Lawson said while the Buckeye Institute has written about eliminating the CAT for years, his group wasn't involved in the drafting of this bill.