Business Leadership to Build a Better Ohio

Business Climate

Tax Reform

In January of 2004, under the leadership of Western and Southern Financial Group CEO John F. Barrett, the BRT tackled comprehensive tax reform as it top public policy priority - and immediately launched a process to research, benchmark, model, design, evaluate, craft and build support for a package of reforms designed to modernize the tax code in Ohio and provide tax relief consistent the organization's vision for robust economic growth.

The need for reform was clear. Ohio's existing business tax system was a disincentive to investment in innovation and job creation. Companies trying to compete globally were effectively penalized by the old tax system - described by one observer as "the perfect gateway to the economy of the 1930s." Ohio's ability to attract and retain top talent was undermined by Ohio's state and local income tax rates, among the highest in the country. Finally, spiraling state spending created constant pressure to generate more and more state tax dollars.

The BRT worked hand in hand with state leaders, business partner organizations and individual companies in an unprecedented public-private partnership to develop and secure support for a comprehensive overhaul of Ohio's tax system reflecting these guiding principles:

  • Grow the talent base
  • Foster new capital investment
  • Broaden the tax base to include all sectors of the economy
  • Stimulate entrepreneurial and start-up activity
  • Make the tax code fair, equitable and simple for taxpayers
  • Rein in state spending 

The result was House Bill 66. Based on an overall economic strategy of shifting the burden
away from taxing investment to taxing consumption, HB 66 included these major reforms:

  • Elimination of the tangible personal property tax on new investment in manufacturing and phasing out the tax on general business property
  • Phasing out the corporate franchise tax for most corporations
  • Phased in a 21 percent reduction in personal income tax rates
  • Enactment of a commercial activity tax (CAT) - a broad-based, low-rate tax imposed on gross receipts from virtually all business activities and entities

(For more detailed information, see the BRT's Business Leader's Guide to Ohio Tax Reform, Tax Reform Year 1 Review and Tax Reform Year 2 Review.)

The BRT's vision was that Ohio's tax code would be viewed across the country as a distinctive public asset in Ohio's economic growth and standard of living, and that by the end of the decade Ohio would begin to see an upturn in business investment and job creation direct attributable to changes in state and local tax policy. That vision has become a reality:

  • In April 2011, Ernst & Young, in conjunction with the Council on State Taxation, issued a report that shows Ohio as having the nation's third-lowest business tax burden for new business investment.
  • In August 2011, Ernst & Young prepared an analysis of the impact of Ohio's 2005 tax reforms on the state's business tax competitiveness, determining that Ohio jumped from the 31st most competitive state and local tax system in the nation in 2004 to the 3rd most competitive state and local tax system in 2009.
  • In March 2012, the Tax Foundation, which for years had criticized Ohio's tax climate as being noncompetitive, released a new study in conjunction with KPMG that ranks Ohio third-lowest among all state for tax burden on new firms and fifth-lowest for tax burden on mature businesses. And no state ranked better on the two lists combined. 

The sweeping tax reforms begun in 2005 - reforms remarkably consistent with the philosophy, guiding principles, economic strategy and mechanics of the BRT's original tax reform proposal - are helping Ohio gain national notice for its investment-friendly business climate.

Ohio Oil & Gas Severance Tax Provisions

Most recently in the tax policy arena, the BRT commissioned Ernst & Young to conduct an analysis of Governor John Kasich's proposed changes to Ohio's oil and gas severance tax provisions. Findings from this analysis are helping to inform the high-stakes public policy dialogue about how to effectively and responsibly capitalize on the opportunity for economic growth represented by Ohio's shale gas deposits.

The Wall Street Journal (July 26, 2012) cited the Ernst & Young study as evidence that the Governor's severance tax proposal will "improve the tax climate" in Ohio and not slow development of shale production in Ohio. The analysis showed that if the proposed severance tax changes are adopted, Ohio's effective tax rate would still rank lowest among any of Ohio's competitor states – and by a wide margin. This objective, third-party analysis brought much-needed context and clarity to a sensitive issue that will impact public support for, and confidence in, shale gas exploration in Ohio.

Tort Reform

Over the years, the BRT has provided strong advocacy for critical tort civil justice reforms. Roundtable CEOs actively engaged in efforts that led to passage of House Bill 350 in June 1997, which restored fairness to Ohio's civil justice system by abolishing joint and several liability, placing caps on non-economic and punitive damage awards, providing for bifurcated trials and imposing a 15-year statute of repose.

Following passage of HB 350, the Roundtable worked in cooperation with the Ohio Alliance for Civil Justice to launch a Litigation Task Force comprising General Counsels of Roundtable member companies to defend various provisions of the legislation at the appellate and Supreme Court level. Unfortunately, the Ohio Supreme Court in 1999 ruled that HB 350 was unconstitutional in its entirety due to violation of the "single subject" rule, creating the need for refocused attention and redoubled efforts from Ohio's business leaders.

BRT CEO advocacy helped secure passage of Senate Bill 80 in 2005, SB 80 brought new levels of fairness and predictability to Ohio's civil justice system through a comprehensive package of commonsense award parameters that fairly compensate individuals who are injured while also providing safeguards to ensure that defendants are not unjustly penalized and plaintiffs and their attorneys are not unjustly enriched.

Key provisions of SB 80 included (a) establishing reasonable caps on punitive and non-economic damages for all tort actions, (b) establishing a 10-year statute of repose within which product liability and construction related lawsuits can filed against the original manufacturer or designer; and (c) allowing defendants to introduce evidence that a plaintiff has received, or will receive, compensation for the same damages from other "collateral sources." In the aggregate, the SB 80 reforms helped enhance business competitiveness in Ohio by discouraging frivolous personal injury lawsuits and checking certain conditions that had contributed to skyrocketing liability insurance costs.

Workers' Compensation Reform

One of the core operating philosophies of the BRT is its selectivity - i.e., its focus on a limited number of issues at any given time. It is fitting, then, that during the Roundtable's inaugural year, the organization focused exclusively on a single public policy issue: comprehensive reform of Ohio's workers' compensation system. Indeed, in many respects, the workers' compensation reform challenge was a testing ground for the viability of the very concept of an "Ohio Business Roundtable."

An independent study by McKinsey & Company had confirmed that Ohio's workers' compensation system was seriously handicapping the state's economic development efforts and identified a package of recommended improvements. Recognizing the serious short- and long-term implications for business competitiveness, economic growth and quality of life, Roundtable CEOs took a leadership role in addressing the problem and advancing solutions.

The vision for reform was clear and ambitious: Convert Ohio's workers' compensation system - which then-Governor George Voinovich had characterized as "the silent killer of jobs" - into a national model of effectiveness and a significant contributor to Ohio's competitiveness while continuing to serve the interests and needs of working men and women. To achieve this objective, the BRT helped forge a coalition of statewide business organizations that worked closely with Governor Voinovich and legislative leaders to enact in 1993 - with bipartisan support - House Bill 107, Ohio's most comprehensive workers' compensation legislation in decades. HB 107 required the Ohio Bureau of Workers' Compensation to establish a comprehensive managed care system to address the system's major cost driver while also bringing about much-need administrative reforms.

Legislative leaders indicated that the reform campaign succeeded because for the first time, Ohio businesses spoke with a single, determined voice. Thus was the BRT's "business model" successfully launched.

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