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IS
THE COMMITTEE TO STUDY STATE AND LOCAL TAXES GOING TO BE EFFECTIVE,
OR IS THE CURRENT OHIO LEGISLATORS
GOING
TO IGNORE THE RECOMMENDATIONS, AS THE PAST LEGISLATORS DID?
October
1, 2002
TO:
Ohio Governor Bob Taft, Ohio Legislators and the 2003 State/Local
Tax Study Committee.
I
highly recommend that you access the 1967, 1982 and 1995 previous
committee reports available at the Committee's
website http://www.state.oh.us/tax/taxstudy/taxstudy.htm
I also
recommend that you look over the state-studies at
the following website
for the Institute for State Studies http://www.statestudies.org/institute.html Please
download
and printout
all of those
reports and read them.
In
1982 (twenty years ago), the State of Ohio wrongfully made the
decision NOT TO KEEP TAXATION AS LOW AND/OR
FAIR AS
POSSIBLE
FOR ALL OHIO BUSINESSES. THEY CHOSE TO GIVE SPECIAL "TAX-BREAKS"
TO A FEW COMPANIES to encourage
them
to move/expand
to/in Ohio, WHILE NOT ADDRESSING
THE NEEDS OF OHIO RETAIL STORES TO REMAIN COMPETITIVE
WITH THE OHIO CONSUMERS.
The
Ohio Legislators have ignored the overwhelming evidence that: 1)
That major changes have taken place in the options
that
Ohio consumers have to purchase goods, and 2) That they have overly
stressed many Ohio Retailers to
the point that
thousands
of Ohio Retail Stores have closed because of being kept
uncompetitive with Ohio Consumers
while still being
required
to pay taxes (even though they are unable to even make a profit).
Ohio
Retail Stores are required to have a Sales/Use Tax Vendors License
and would most likely be on a monthly payment
schedule.
The total number of these type of accounts have been declining
rapidly the past four years. As of July 1st of the
year
shown, Ohio had the following totals for vendors under that
category: 1999 - 113,754, 2000 - 94,515, 2001 - 92,590 and
2002
- 88,790. The State of Oho LOST 24,964 VENDORS who fell under that
category, and most of them were
most likely Ohio
Retail
Stores. That is a 21.9 PERCENT LOSS IN 4 YEARS! 21,164 (OR 84.7 PERCENT) of
that decrease was before the events of
September
11, 2001.
Two-Thirds
of this Nations economy is driven by Consumer-Spending and the Ohio
Legislation has sadly under estimated
the
"Power of the Consumer". It is "Human-Nature"
for an individual to SAVE MONEY by paying less for
desired merchandise,
and
the existing Ohio Taxation Laws are driving Ohio Consumers away from
the Ohio Retail
Stores, UNFAIRLY.
Ohio
Retail Stores are the "SALES-TAX-COLLECTORS" for the State
of Ohio. Ohio Retail Stores are also not exempt
from the
requirement
to the PAY PERSONAL PROPERTY TAXES on their INVENTORIES. NO CONSIDERATION
IS GIVEN TO ANY OHIO
RETAILER AS
TO WHAT ECONOMIC IMPACT those tax requirements
may have in being able to retain and/or compete for
the
Ohio Consumers
business.
While
our existing Governor and candidate Hagan both want
"tax-loopholes" to be plugged, the Department of Development
and
the Legislators involved with those "tax-incentives", are
handing them out right and left. They even just granted Target
Corporation
a 75 percent 10 YEAR "tax-credit" for a new distribution
center (a Multi-Billion Dollar Retailer) who is NOT
CONFORMING
to Ohio's Use-Tax Laws involving "SUBSTANTIAL-NEXUS" when
shipping thousands of packages
into Ohio
everyday
from their "out-of-state" retail outlet TARGET.COM
website/facility in Minnesota (losing
Ohio Government Millions of
Dollars
of Sales-Tax Revenues). Every TV commercial that Target airs has target.com
right at the beginning of it. LLBean is
now
running TV commercials pushing their "toll-free" number to
call for a free catalog
and displaying their internet web
address.
There are tens-of-thousands of Mail-Order and Internet websites THAT DO
NOT CHARGE OR COLLECT ANY OHIO
SALES/USE-TAX.
OHIO CONSUMERS LOVE IT!
The
Ohio VOTER has already made their decision if they want Sales-Tax or
not. They are already voting with their wallet.
Hundreds-of-Thousands
of Ohio Consumers are NOW avoiding any Ohio Sales-Tax by purchasing
their goods "out-of-state"
via
Mail-Order, Catalog or the Internet. Any proposal to increase Ohio's
Sales-Tax will simply push even more
Ohio
Consumers
into buying more goods "out-of-state". Ohio's Sales-Tax
Laws (in essence) helped to create Mail-Order
and
increased
the savings potential that Ohio Consumers receive by avoiding the
Ohio Retail Stores, while at the same
time,
weakening
the Ohio Retailers financial ability to remain competitive (even to
stay in business). THE OHIO VOTER/CONSUMER
WILL
ALWAYS FAVOR A SALES-TAX INCREASE VS. A INCOME-TAX INCREASE BECAUSE
THEY ALREADY KNOW HOW TO SAVE
100% OF
THE SALES-TAX FOR MANY OF THEIR PURCHASES.
The
1967, 1982 and 1995 Committee Reports ALL MAKE THE STATEMENT THAT
OHIO TAXATION LAWS ARE UNFAVORABLE
TO
ECONOMIC
GROWTH WITHIN OHIO. The 1982 Report recommended that the Property-Tax for
businesses "be repealed". The
1995
Report, with respect to Property-Taxes involving business taxation, recommended that
the "Property-Taxes on
INVENTORIES"
be ELIMINATED IMMEDIATELY. >From page 7-4 of the 1995 Report.
"Personal property taxes are levied on
inventories
in Ohio. Most states which impose the personal property tax do
not tax inventories, in fact, only 16 states
continue
to tax inventories (these include Indiana, Kentucky and West Virginia).
There are many reasons why inventories
should
not be taxed. The tax is inequitable, because the presence of a high level
of inventories does not necessarily imply a
greater
ability to pay. In fact, the presence of a large inventory value may be
less an indicator of wealth than an indicator that a
firm
has had a bad year and consequently has less ability to pay.
Moreover, some industries naturally require higher levels of
inventory
than others and are unfairly treated under tax. Clearly,
the existence of an inventory tax is a negative factor for any
business
considering an Ohio location for a distribution center.
It acts as an offset to the locational advantages of the state.
Thus,
the unfairness of the tax and its negative impact for development
in Ohio are two strong arguments against the
personal
property tax on business assets." This was ignored by the
Ohio Legislators in 1982, and then again in 1995 when the
Internet
was born. Regarding the State of Indiana mentioned
above, they have already enacted LEGISLATION TO PHASE-OUT
"property-taxes"
on inventories over
a 5 year period starting next year.
Ohio
Government must make the commitment NOW to overhaul the Ohio
Tax-System. It is far too complicated, and is
ignoring
the
needs of small retail business. In fact, it destroys small retail
business in favor of giving "tax-breaks" to large
companies.
TAX
BREAKS SHOULD NOT BE ALLOWED - - AS RECOMMENDED IN THE 1995 STUDY.
Those "tax-credits" are unfair to all the other
Ohio
businesses. The crippling taxation revenues collected and paid
by Ohio Retailers are often just offsetted by the "tax
credits"
that manufacturing firms receive. There seems to
be a "Power-Hungry" set of Ohio Legislators who want to play
"GOD"
on who gets the breaks and who doesn't. THE ABILITY
OF "TAX-BREAKS" DISTORTS FAIR TAXATION by changing the
rules
for some, but not for most.
Also,
in the 1995 Report: "TAX INCENTIVES AND ENTERPRISE ZONES:
Special tax treatment of businesses by definition
creates a
horizontal
inequity. The choice facing any state is whether to give targeted
tax incentives or to provide all
of the states's
businesses
with the lowest taxes possible. Ohio has chosen the former approach,
and provides a range of
tax incentives.
The
most important is the Enterprise Zone Program." From page 7-8
of the same 1995 Report: "Proposal:
Abolish enterprise
zones,
and prohibit the use of targeted tax incentives to recruit companies to Ohio."
THIS IS THE "TAX LOOP-HOLE" THAT
EVERYBODY
IS TALKING ABOUT... OHIO DID NOT DESIRE
TO MAKE ALL OF OHIO BUSINESSES HAVE THE LOWEST TAXES POSSIBLE
(so
where is fair taxation???).
The
Ohio Retail Store cannot exist without customers. IT IS TOTALLY
RIDICULOUS FOR THE STATE OF OHIO
TO PUT THE SAME
BUSINESS
TAX BURDENS ONTO OHIO RETAIL STORES, WHEN "PRICE" IS THE
MAJOR FACTOR THAT MOTIVATES THE CONSUMER TO
MAKE
A PURCHASE.
Ohio
Government should allow Ohio Retailers to be able to compete "on
a equal and fair basis" for business from the Ohio
Consumer.
Only by immediately eliminating personal-property tax on
INVENTORIES, and immediately eliminating
SALES-TAX
ON
CONSUMER GOODS will you get the Ohio Consumer back into the Ohio Retailer.
Ohio
Legislators must allow Ohio County Governments to develop an
INCOME-TAX and eliminate "Piggy-Back" Sales-Taxes
as
a
method of revenue generation. The same is true for the
Regional-Transit Authorities and School Systems. The
higher the
total
Sales-Tax is, the more the local consumers will stop coming to the
local stores. The inability of the
Ohio Tax Department
to
be able to police and enforce all "Use-Tax" collection
from Ohio Consumers is also undermining
those needed revenues
for
Ohio's County Governments. The Multistate Tax Commission effort will be
very time consuming and expensive for the
State
of Ohio to implement and is many years away. Todays consumer
has no loyalty from whom they purchase from. Their
purchases
are based strickly on "LOWEST-PRICE, FREE-SHIPPING
and NO-TAX". The MTC effort will simply shift the consumers
decisions
to other retailers in other states
which do not participate with the program, and, the State of Ohio
has no-way to
monitor
that.
On
page 5-16 of the 1995 Committee Report under Sales-Tax. "The
distribution of Ohio's sales tax burden is regressive when
measured
against current income. Households with incomes between $5,000 and
$9,999 pay 2.6 percent of their income in
sales
taxes and households with incomes above $50,000 pay 1.3 percent of
their income in sales taxes. Thus, the burden on
low-income
households is almost twice as large as that on high-income
households. Still, more than 60 percent of the sales
tax on
consumer purchases is paid by households with $30,000 or more in
income. Moreover, the per household tax payment
is much
greater for higher-income households. For example, households with
incomes over $50,000 pay nearly five times
more in
taxes than households with income between $5,000 and $9.999."
HAS ANYONE FACTORED IN THAT TODAY MOST
HOUSEHOLDS
OVER $20,000 ARE NOW CONNECTED TO THE INTERNET AND HAVE THE ABILITY
TO AVOID THE OHIO SALES-TAX ON
MOST
CONSUMER GOODS??? Nobody in the Ohio Government
can report the actual loss of Sales-Taxes due to "out-of-state"
purchases
because the information is not
obtainable. The largest drop of Sales-Tax revenues will be from the
higher income
households
who have the benefits
of additional technology resources available to shop
"out-of-state", right in their home.
The
percentage that
higher-income households create in sales-tax revenues are
"assumed" to be spent locally and NO
INFORMATION
IS AVAILABLE AS TO HOW MUCH PURCHASING IS DONE
"OUT-OF-STATE" in which they
were not charged any Ohio
Sales
or Use Tax.
I
estimated back in 2001 the State of Ohio lost $450,000,000.00 in
Sales-Tax Revenues from Ohio consumers who were making
their
purchases "out-of-state". That would relate to
$375,000,000.00 in State Sales-Tax and a additional $75,000,000.00
in County
Government/Regional
Transit Piggy-Back Sales-Taxes. However, that relates to $7,500,000,000.00
(7.5 BILLION DOLLARS) in lost
retail
sales within Ohio for Ohio Retail Stores from Ohio Consumers.
That would be for fiscal-year July 1, 2000 thru June 30,
2001
(before the tragic events of 9/11). I strongly feel that
the "out-of-state" losses for the year that followed
(2002) will reach
a
total of $600,000,000.00 in lost Sales-Tax for Ohio
Tax Revenues. That would relate to losses of $500,000,000.00 for the State
and
$100,000,000.00 for County Government/Regional
Transit Services. Ohio Retail Stores would have lost $10,000,000,000.00
(10
BILLION DOLLARS) of
Retail Sales. For every dollar lost in your Sales-Tax Revenue a
local Ohio Retailer lost 16 dollars of
needed
local support. This
whole thing is way "OUT-OF-CONTROL".
From
the 1967 Committee Report..
"EVALUATION
OF TAX POLICY
Most
persons of knowledge and experience in the field of taxation would
agree that the following factors should be included
in an
evaluation of tax policy.
EFFECT
OF ECONOMIC GROWTH
A
tax structure should be designed so as to be consistent with the
economic goals and objective of a state. One of Ohio's
principal
goals is the development and expansion of desirable economic
activity within the State. This suggests
that
the State should not depend excessively upon taxes with major
deterrent or distorting effects on economic
activity
or upon taxation of consumption of legitimate goods and services in
such a degree as to arbitrarily depress
such
consumption.
NEUTRALITY
As
a general proposition, a tax should be applied uniformly over a
broad base rather than being spotty or highly selective as
to the
portions of the tax base on which it falls. Its purpose normally is
the raising of public funds in an equitable manner and
it should
be manipulated for non-fiscal purposes, if at all, with great care
and with clear demonstration that the regulatory
purpose is
essential.
EQUITY,
OR FAIRNESS
The
burden of a tax and of the tax structure should be distributed as
fairly as possible among the taxpayers. Those who
are
similarly
situated should bear comparable burdens. Inevitably the kinds and
amounts of taxation fall differently on taxpayers
who
are not similarly situated but these differences should be as simple
and reasonable as possible. If governing bodies
have
to enact tax policy under crisis circumstances, equity often is
reduced by following the path of least resistance
in order
to
obtain new revenues.
ADMINISTRATIVE
FEASIBILITY
Taxes
should be capable of effective administration at reasonable cost to
the government. Taxes easily evaded or avoided
are
undesirable. Taxes which are unduly selective or punitive or
inequitable tend to be complicated in their administration,
encourage
avoidance and evasion, and incur higher administrative costs per
dollar of revenue collected.
COMPLIANCE
COSTS
Taxes
should impose minimum cost and inconvenience on the taxpayer in the
course of his compliance with the law.
Especially,
the tax should not penalize the conscientious taxpayer who keeps
good records as compared with others who are
less
careful.
RELATIONSHIP
TO THE MODERN ECONOMY
Insofar
as possible, a tax or tax structure should be capable of growing
with the economy of the state and should be revised
from
time to time so as to correspond with the true makeup of that
economy as it develops and changes. Some
products,
habits
of consumption, and classes of enterprise decline, while others rise
to take their place. Ideally a tax structure
should
be
reviewed and revised as necessary so as to bear a relationship to
the way people are doing things,
regardless of whether
additional
revenues are needed at a given time."
The
above text is straight from the 1967 report. The State of Ohio did
not make any changes to protect the losses of the Ohio
Consumers
business to Ohio Retailers as "toll-free" telephone
numbers were developed allowing consumers to call
"out-of-state"
mail-order/catalog companies without incurring any
"out-of-pocket" cost for comparison shopping. Ohio
Government
failed to change tax-revenue-laws to correct the way Ohio consumers
were changing in the way they did things
as technology
gave the Ohio Consumers a "no-cost" access to national
competition for the consumers retail dollar. The
Sales-Tax
has been a major deterrent for purchasing consumer goods for Ohio
consumers from Ohio Retailers (this has
been
against the principles of EFFECT OF ECONOMIC GROWTH, above). It is
also extremely easy for the Ohio consumer
to avoid
the
Sales/Use-Tax on most consumer items when buying
"out-of-state", therefore, this makes the Ohio Sales
Tax an
UNDESIRABLE
TAX (see ADMINISTRATIVE FEASIBILITY above). And finally, the State
of Ohio did not
change the way it could
effectively
monitor "out-of-state" sales as consumers changed their
buying methods, and did not grant
any "tax-relief" to Ohio
Retail
Stores to allow them to remain competitive, therefore ignored the
"relationship to the modern
economy" factors above.
Up-Front
Sales-Tax on leases for vehicles and business equipment, as well as
the cigarette-tax increase were recent changes
to
fix the "Ohio Budget Crisis". They are perfect examples of
Ohio Legislators making changes in tax revenue laws/rates
in a
"crisis
circumstance" as they seemed to be the path of least resistance
in order to obtain new revenues. THOSE
LEGISLATORS
WHO SAY THAT SALES-TAX DOESN'T HURT A BUSINESS BECAUSE ITS THE CONSUMER
THAT PAYS THE TAX AND NOT
THE
BUSINESS, DO NOT UNDERSTAND THAT THE OHIO
CONSUMER HAS ALREADY STOPPED COMING TO THE OHIO RETAIL STORE AND
IS
NOW SHOPPING
WITH "OUT-OF-STATE" MAIL-ORDER AND THE INTERNET FIRMS.
The recent annoucements by
the State of Ohio
Tax
Department that they are pleased with the increase in the
Cigarette-Tax Revenues for the State since the
Tax Increase
just
confirmed to all of the Ohio Consumers who are now shopping
"out-of-state" for their cigarettes that Ohio
Government
didn't
need their money anyway. The Tax Laws have made it A GAME WITH MANY CONSUMERS
AS TO HOW MUCH MONEY THEY
CAN
SAVE.
Legislators
should not enact changes in tax-laws and/or rates without first
understanding what reaction either consumers
and/or
businesses might have, and, to what point that these changes would
adversely effect unfairly Ohio
Businesses. The
Ohio
Department of Taxation, Enforcement Division, should be present in
any legislative committee meeting
involving any
potential
tax changes, to give reasonable input as to the potential
difficulties in verifing that tax obligations are
being met by
both
business and/or the consumer.
How
can you expect a Ohio Retail Store to be able to pay a "Living
Wage" to their employees? How can you expect owners
of
small
(tiny) retail stores to have any "Quality of Life" if you
keep them unfairly uncompetitive with the Ohio Consumers,
especially
for items readily available on the Internet/Mail-Order?
In
reality, the Ohio Tax-Laws for Ohio Retail Stores really SUCK. You
must, in all fairness, shift more of the tax revenue
needs
toward
individual income-tax increases, and less dependency from
tax-revenues from retail stores in
the form of sales-tax
collections
and inventory taxation. This will be a disliked change to the Ohio
Voter (who is the
Ohio Consumer who saves by
shopping
"out-of-state") but will also be appreciated by those Ohio consumers who
do desire to support local businesses,
but
when they do, have higher "out-of-pocket" cost caused by the present
taxation system. Only by doing this will you put the
local
Ohio Retail Stores on a "Fair and Equal Opportunity
Basis" with establishng a "true level playing field".
Increase the "NET
INCOME-TAX"
for businesses
for those that are able to make a profit, but don't destroy them by
requiring them to pay taxation
even though
they are suffering losses.
Again,
any Ohio Sales-Tax increase will simply DRIVE MORE OHIO CONSUMERS TO SHOP "OUT-OF-STATE".
At a minimum, lessen
the
savings that Ohio consumers receive when they shop "out-of-state"
by REDUCING THE SALES-TAX BY ONE PERCENT (reduce
the
State Sales-Tax from 5 down to 4 percent).
That would start getting the Ohio Consumers back into the Ohio
Retail Stores
faster
than anything else.
There
are those that feel that the only reason that sales are down from
local consumers at local stores is mainly due to the
higher
unemployment and the stressed economic times. Of course there would
be some local business affected that way.
However,
those that are employed continue to seek "Lower-Prices"
for their own desired purchases and are expanding their
selections
to more "out-of-state" retailers (PERMANENTLY). This has
now become habit and continues to erode your current
Sales-Tax
Revenue base, and further reduce the local Ohio consumer support of
Ohio Retail Stores.
The
current and past Ohio Legislators have put the needs of Tax-Revenues
shamefully ahead of the well-being of Ohio
Retail
Stores
to be able to compete with the Ohio Consumers on a "fair and
equal basis".
Again,
I respectfully request that Amateur Radio Equipment and accessories
be exempt from Ohio Sales-Tax effective
immediately
when sold to an FCC Licensed Radio Amateur Operator. I estimate that
85 percent of all major
amateur radio
equipment and
accessory purchases are now purchased "out-of-state" by
amateur radio operators.
There are only 4 amateur
radio
stores in Ohio. It is not the other 3 in Ohio that I am having
trouble competiting with.
It's the other 96 in the other 47
States
(USA 48) in which none of them charge or collect any Ohio
Sales/Use-Taxes, and many
provide "free-shipping". I would
estimate
that 70 percent of all Amateur Radio Operators are on the Internet
and 100 percent
of them have phone service that
can
dial 800 WATS numbers anywhere in the U.S.A..
Please
don't make the same mistake that the Ohio Legislators made in 1982
and 1995 by ignoring the recommendations of the
newly
established Committee to Study State and Local Taxes (Ohio).
Regards,
Rick
Wells
NOARD
Brunswick,
Ohio 44212
email:
k8sci@noard.com
PH:
330 225-7373 |
