The Ohio House Ways and Means Committee heard sponsor testimony this week on House Bill 234, which proposes a five-year phase-out of the state’s Commerical Activity Tax (CAT). Ohio’s CAT was enacted in 2005, when the OMA helped lead the repeal of Ohio’s antiquated corporate tax and tangible personal property tax. Those taxes were replaced with the manufacturing-friendly CAT — a gross receipts tax that features a single low rate of 0.26% on in-state sales, while out-of-state sales are exempt. The sponsors of HB 234 contend the CAT is a failed tax that distorts economic decision-making, but they overlook the fact that the CAT’s broad base and low rate minimize its impact on economic decisions. Moreover, CAT repeal under HB 234 would create a $2 billion annual budget gap — and with recent state spending increases for education, as well as cuts to personal income tax rates, repealing the CAT could mean it would be replaced with a new, much more burdensome tax on manufacturers. OMA staff will continue to monitor HB 234 to ensure that repeal doesn’t mean repeal and replace. 10/14/2021