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CNBC Ranks Ohio Fifth in the Nation for Cost of Doing Business

July 16, 2011 

State’s business-friendly redesign helps companies retain more profits and keep costs down 

COLUMBUS, Ohio, July 12, 2011 /PRNewswire/ --Cost is a major consideration when a company chooses a location. The ideal business location maximizes the value of the investment by delivering a perfect balance between access to mission-critical resources and low overhead costs. 

Ohio continues to gain recognition for its favorable business climate and tax structure, combined with low business and personal costs, make the state an increasingly viable location for business growth. According to CNBC’s “America’s Top States for Business 2011” report, Ohio ranks 5th in the nation for Cost Of Doing Business. Ohio improved to 5th place from 29th place last year due to a multi-year effort to reform the state’s tax structure, which took full effect in 2010. 

The CNBC ranking is based on tax burden, including individual income and property taxes, as well as business taxes, particularly as they apply to new investments. Costs for utilities, wages, and rental costs for office and industrial space were also considered (rental cost information furnished by CoStar Group). 

The top five states for Cost of Doing Business are Iowa and Arkansas tied for first place, followed by Missouri, Kentucky and Ohio. 

Ohio’s proactive, business-friendly redesign was implemented to help companies better compete in a 21st century global economy and deliver the perfect balance businesses and their owners need to achieve that success. 

Cost of doing business is a very important factor CEOs and entrepreneurs consider when determining a location for capital investment. The more investment capital that actually makes it to product development and commercialization, the greater the probability of success. And, the faster the return on investment. 

“Just one of Ohio’s many business incentives includes a sweeping tax reform, which is recognized as a key contributor to keeping overhead costs down,” said former Ohio Tax Commissioner Thomas M. Zaino, J.D., CPA, now member in charge of the Columbus office of the McDonald Hopkins LLC law firm. “In fact, Ohio was recently recognized as having the third friendliest tax environment in the nation.” 

Zaino refers to the report issued by the Quantitative Economics and Statistics Practices (QUEST) of Ernst & Young in conjunction with the Council On State Taxation (COST), which provides a state-by-state comparison of tax liabilities, ranking Ohio third in the nation for friendliest tax environment. 

Over the last five years, Ohio lawmakers dramatically revamped the state’s tax structure to create the lowest tax rates in the Midwest and an extremely profit-friendly business climate for companies that locate in the state, despite a national recession that caused several other states to raise taxes. The state’s central location and tax structure makes it cost effective for companies to serve customers in North America and around the world. 

The most notable changes to Ohio’s tax system include the elimination of two very burdensome business taxes – the corporation franchise tax and the tangible personal property tax. These taxes were replaced by a new, 0.26 percent Commercial Activity Tax (CAT), which applies only to in-state sales. For example, if a business were to ship 100 percent of its sales out of Ohio, it would pay zero CAT, increasing Ohio’s appeal to companies that export goods out of the state or country. 

“Because the CAT applies to receipts rather than profits, a more profitable business does not incur higher taxes,” said Howard Fleeter, Ph.D., a partner in the Columbus-based economic analysis and public policy research firm of Driscoll & Fleeter. Companies in states that tax profits incur a “success penalty” because efficiency and productivity gains trigger higher taxes. 

Another important change is a 16.8 percent reduction in the personal income tax, which is scheduled to grow into a 21 percent reduction for 2011. This benefits individual wage earners, unincorporated businesses and entities such as S corporations and limited liability corporations (LLCs), which are increasingly popular business structures for growing businesses. 

Elimination of taxes on the first $1 million of gross receipts is another aspect of Ohio’s business tax reform that makes the state particularly attractive to entrepreneurs. Instead, businesses pay a minimal, flat fee of $150 on up to $1 million in sales. 

In addition, Ohio businesses also pay no tax on capital investments, which frees up funds for investment in plants, equipment, inventory and personnel. And, because only business activity that takes place in Ohio is taxed by the state, entrepreneurs have an incentive to serve customers across the country and around the world. 

Economic development incentives and public-private support encourage business success and make the state an ideal location for businesses to locate or expand operations. Also, strategic investments by the Ohio Third Frontier are paving the way for commercialization of new technologies. 

In addition to a low cost of doing business, Ohio provides all the criteria needed to successfully start, grow or expand a business -- access to supply chain and markets, access to business capital and support services, access to knowledge and labor and access to a balanced life. 

“Ohio’s success is not solely dependent on the strength of its business advantages. It’s about Ohio’s promise of work-life balance,” said Ed Burghard, executive director of the Ohio Business Development Coalition, the nonprofit organization that markets the state for capital investment. “Low-cost, low-stress communities and short commutes create the State of Perfect Balance, where you can achieve both professional and personal success without sacrificing one for the other.” 

About the Ohio Business Development Coalition:

The Ohio Business Development Coalition is a nonprofit organization that provides marketing strategy and implementation to support Ohio’s economic development efforts. For more information, visit Ohio Business Development Coalition




 
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