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Eliminating commercial activities tax would attract businesses, save residents money, group says

An Ohio state flag flies in front of the Ohio Statehouse in Columbus, Ohio.

(The Center Square) – Removing the commercial activities tax (CAT) would make Ohio more attractive to businesses and save residents hundreds of dollars annually, a new report reveals.

The findings are in a new report from The Buckeye Institute titled “Letting the CAT Out of the Bag: How to Improve Ohio’s Economy and National Rankings.”

The Buckeye Institute said Ohio’s CAT costs the average Ohioan $300 annually.

“Despite research that shows the harmful effects of the commercial activity tax, Ohio still maintains this antiquated, Depression-era tax that hampers growth and prosperity for employers and employees across the state,” Rea S. Hederman Jr., executive director of the Economic Research Center at The Buckeye Institute and vice president of policy, said in a news release. “Repealing this heavy corporate tax burden, especially as employers and employees struggle to survive and recover from the disruptive effects of the coronavirus, will enhance the economic freedom and opportunity that Ohio needs.”

Hederman authored the report with Andrew J. Kidd, who was an economist at the Economic Research Center, and James B. Woodward, an economic research analyst at the Economic Research Center.

According to The Buckeye Institute, citing figures from the Ohio Department of Taxation, the CAT brought in nearly $1.8 billion to the state during fiscal 2018. That represents less than 7 percent of the state’s overall tax revenue and less than 3 percent of its total budget.

However, “alleviating the tax and administrative burdens of compliance will free-up resources for companies that do business in Ohio, allowing them to reinvest in workers and capital purchases, two important drivers of economic growth,” The Buckeye Institute said in its report.

Zach Schiller, research director of Policy Matters Ohio, disagreed with repealing the CAT, saying business taxes in Ohio are lower than the national average and that the state is “one of just six states with no state corporate income tax.” He said the state needs “a strong corporate profits tax” rather than a repeal of the CAT, adding that most businesses do not even pay the CAT.

“At a time when the state is already cutting aid to K-12 and higher education and predicting more than a $2 billion deficit, this would compound the state’s fiscal problems,” Schiller said. “It could also hurt long-term economic prospects, which depend on a strong education system.”

This story has been updated to remove incorrect information provided to The Center Square.

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