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Taft#039;s tax plan built on solid business logic

The late President Ronald Reagan once joked that the nine most terrifying words in the English language were: "I'm from the government and I'm here to help."

And, sadly, many of us often feel some truth in the humor of mocking the government a bit.

Becoming jaded toward the government is pretty commonplace these days. And that's because many times the actions of the government seem to be counterproductive to what is good for the community.

Take, for example, Ohio's outdated tax code. On one hand, the state takes economic development very seriously. And it should; a thriving economy is the backbone of the state.

Despite that fact, Ohio's tax laws have thrown up roadblocks to that thriving economy. For years Ohio has taxed machinery, equipment and inventories. So what does that mean? It means the tax code encouraged businesses not to add new machinery. It encouraged industry to avoid adding new equipment or keeping a large inventory on hand. All of those factors hurt existing businesses within the state.

But that is not all the tax code does. As if curbing the encouragement for existing companies to grow wasn't bad enough, the current tax code also discourages prospective businesses from relocating to the state. Ohio's current franchise tax is one of the highest franchise rates around.

What's worse is that the franchise tax brings in little money compared with the high rate. Why is that? It's simple: The franchise tax can be avoided through numerous tax loopholes. The problem is that the high tax rate scares away potential developers before they ever get to the point of understanding the loopholes. So Ohio rarely gets a second look.

Fortunately, hope is just around the corner. Gov. Bob Taft's tax reform plan includes a number of logical tax reforms. Included among Taft's proposals is the elimination of the machinery, equipment and inventory taxes. Those along with the Swiss cheese franchise tax would be eliminated entirely, replaced by a corporate activity tax (CAT). The new tax featured a much lower rate than the existing franchise tax. But in addition, to the lower rate, the lack of loopholes makes the CAT not only less intimidating for developers, but also fairer for existing businesses.

Taft's tax plan may not eliminate all of society's cynicism about government, but it certainly could dull a few of the barbs.