Ohio tax reform plan will impact CPAs.

• Position: Breaking news

Gov. Bob Taft announced his state budget proposal in February, which includes plans to reform Ohio's tax structure and to cut spending.

A cornerstone of Taft's plan would make significant reforms to Ohio tax code by applying a new commercial activities tax (CAT) to essentially all businesses and professionals--including accounting firms.

In order to gauge member opinions, The Ohio Society has sent members a survey concerning various aspects of the proposed tax reform package. Results will be used to help The Ohio Society develop its formal position on the tax reform plan.

On the spending side, Gov. Taft is also proposing to "save taxpayer money" by combining professional licensing boards, including the Accountancy Board, under one of three different state agencies.

Highlights of the budget proposal include:

* Limit Medicaid spending growth to 3.6 percent.

* Increase school funding increase to 2.4 percent.

* Increase funding for rehabilitation and corrections to 2.2 percent.

* Reduce local government funding by 3 percent.

* Consolidate 27 independent boards, including the Accountancy Board of Ohio.

Tax cuts in the proposed budget include:

* Reduction of all personal income tax brackets; 21 percent by 2010.

* Phase out of corporate franchise tax; 20 percent per year.

* Phase out of tangible personal property tax on equipment (2 years) and machinery (4 years).

* Elimination of "sponge tax" (additional state estate tax).

Proposed new or increased taxes include:

* Commercial activity tax on Ohio sales (gross receipts), levied at a rate of .26 percent, will be phased in equally over five years, replacing the corporate franchise tax and tangible personal property tax. While the corporate franchise tax is slated to be phased out over five years, the inventory tax and machinery and equipment are scheduled for a four year and two year phase-out respectively. As proposed, there is a $1 million exemption for small business. Businesses with receipts under that threshold will pay $100. There is no cap on the tax...