Misleading advertising campaign slams state lack of corporate income tax, ignores more harmful trade levies

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Massive billboards in New York, Los Angeles, Boston, Seattle, Chicago and San Francisco, along with nationwide TV commercials, invite CEOs, entrepreneurs and investors to do business in the Ohio. The campaign, which is run by the Columbus-based nonprofit Ohio Jobs, boasts that “Ohio has a 0% state tax on corporate income, R&D investments, and goods and products sold out of state.” This ad campaign, however, is based on a lie. At least it’s not based on the full truth.

Ohio may not impose a traditional corporate tax on businesses, but the state instead imposes a corporate income tax that economists across the ideological spectrum see as more damaging than a tax. traditional on corporations. Instead of a corporation tax, the state of Ohio applies what is known as the Business Activity Tax (CAT) on businesses.

Unlike a traditional corporate tax, which applies to corporate profits, CAT applies to gross corporate revenues. As such, an Ohio employer who is not making a profit and even losing money still faces CAT liability.

“Gross revenue taxes have an impact on businesses with low profit margins and high production volumes because the tax does not take into account a company’s production costs,” Corporation tax would have,” written Janelle Cammenga, Policy Analyst at the Tax Foundation. “These taxes can be particularly severe for start-ups and entrepreneurs, who typically show losses in the first few years while still being owed by the payment of gross receipts.”

Ohio and six other states – Texas, Washington, Oregon, Tennessee, Nevada and Delaware – impose a state tax on gross receipts. Oregon is the most recent state to adopt a gross revenue tax, in 2019. The rates and structures of these gross revenue taxes vary from state to state.

“Washington’s business and professional tax has the highest rate of 3.3%, followed by the Delaware manufacturer and merchant license tax with a maximum rate of 1.9914%,” says Cammenga. “Ohio and Oregon have flat rates of 0.26% and 0.57%, respectively.”

The JobsOhio ad campaign could lead many to believe that Ohio does not impose any corporate income tax. Still, there are only two states in the United States, Wyoming and South Dakota, that can boast such an advantage. A third state, North Carolina, may soon join South Dakota and Wyoming in bragging about no corporate income tax or gross revenue tax.

North Carolina corporate income tax, at 2.5%, is the lowest corporate tax rate in the United States among the 41 states that impose the levy. The new budget approved by the North Carolina Senate on June 24, completely eliminate corporate taxes by 2028.

North Carolina is already the only state in the southeastern United States that would still have a combined federal and state corporate income tax rate below 30%even taking into account the federal corporate tax increase proposed by President Joe Biden. The budget approved by the North Carolina Senate would increase this benefit. Supporters of corporate tax hikes tout them as a way to make CEOs and investors pay more, but North Carolina Senate budget recognizes corporate tax burden is over account supported by ordinary people.

“A” company “is simply a collection of contracts between individuals – investors, lenders, executives, workers, sellers and consumers”, written John Hood, President of the John William Pope Foundation. “Only people pay taxes. Legal abstractions cannot.

“North Carolina has been steadily reducing its corporate tax rate for almost a decade now,” adds Hood. “Its complete elimination over the next few years will generate economic benefits far beyond the apparent budgetary cost. We will attract more investment, creating more jobs at higher wages. And, yes, consumers will pay lower prices.

Ohio lawmakers will need to repeal or phase out their CAT if they want JobsOhio’s ad campaign to no longer be so misleading. While Ohio lawmakers cannot honestly present their state as having no corporate income tax, Buckeye state officials have a lot to brag about – the recent passing of the biggest personal income tax cut in history.

As part of the new biennial state budget approved on June 29, Ohio lawmakers reduced state income tax by $ 1.6 billion, the largest cut in income tax ever recorded in Ohio. The new budget repeals the top two tax brackets, resulting in a new top rate of 3.99%. It turns out that this is the same rate that the North Carolina personal income tax would cut under the Senate budget, which cuts the state’s flat tax rate by 5 , 25% to 3.99%.

Like the North Carolina Senate budget, the new Ohio budget increases the standard deduction, also known as “the zero tax bracket.” Ohio’s new budget raises the zero tax bracket to $ 25,000, from $ 22,600.

This new budget builds on Ohio’s last two budgets, which included the elimination of several tax brackets. With this progress, legislators in Columbus are gradually moving Ohio closer to a lump sum personal income tax. This achievement is something JobsOhio might consider bragging about. Contrary to their campaign’s current claim, this is a very true distinction that requires no warning.

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