Lower business costs earn state high marks
Tax reforms begun in 2005 help propel Ohio to better rankings in CNBC's evaluation

Wednesday, July 13, 2011 06:41 AM
By Mark Williams

THE COLUMBUS DISPATCH

Business-friendly changes in Ohio's tax structure have given the state a boost in a national ranking.

Ohio moved up to fifth this year from 29th last year in the 'cost of doing business' category that is part of business cable-television channel CNBC's 'America's Top States for Business.'

The improvement in that category was a major reason that the state jumped to 23rd on the list overall, compared with 34th last year.

"Folks across the country are starting to see the full impact of (the business-tax reforms) and that this system created in Ohio is allowing people to fully grow their business at lower costs," said Thomas Zaino, a former Ohio tax commissioner and now managing partner of the Columbus law firm McDonald Hopkins.

He said the value of the tax cuts, when fully implemented, totaled $2billion a year for businesses and consumers. The cut was significant not just for its size, he said, but because the state was able to go ahead with it despite the worst recession since the Great Depression.

"What impresses people is the thoughtfulness and logic" of the tax reforms the state has put in place, said Ed Burghard, executive director of the Ohio Business Development Coalition.

Iowa and Arkansas tied for first in the "cost of doing business" category, followed by Missouri and Kentucky.

Ohio began implementing sweeping business-tax reforms in 2005, substituting a modified gross-receipts tax for corporate income and franchise taxes and eliminating business tangible personal-property taxes.

Ohio also has been phasing in a 21 percent personal income-tax cut that will be finished this year.

Burghard said it often takes several years for reforms such as those done in Ohio to start showing up in surveys such as the one by CNBC.

"The bulk of the tax reform is actually starting to hit the numbers," he said.

The CNBC study comes after a report by the Council on State Taxation in April said Ohio had the third-lowest tax burden for new business investment.

But not everyone has been impressed with Ohio's reforms.

The conservative-leaning Tax Foundation put Ohio 46th in its 2011 Business Tax Climate Index, which also takes into account other taxes beyond those just paid by business.

Taxes are only a part of the equation that CNBC uses for its ranking on the cost of doing business. The business channel also takes into account utility costs, the costs of wages and costs for office and industrial space.

Of the 10 categories included in the rankings, the state's best finish was No. 4 in the infrastructure and transportation category. The worst finish was No. 50 in the work-force category, which takes into account factors such as the education level of the state's work force, the number of available workers and union membership.

The state also came in 42nd in business friendliness, a category that includes regulation and litigation.

The study takes into account 40 measures of competitiveness.