Impact Of Proposed Tax Credits Could Take Years

By: AP | NBC4i.com
Published: February 07, 2009

COLUMBUS, Ohio -- During his recent State of the State address, Gov. Ted Strickland proposed a handful of new or expanded tax credits for businesses to demonstrate his commitment to job creation in economically depressed Ohio. But two of Strickland's proposals won't have an impact on Ohio's budget for at least three years. The governor proposed expanding a tax credit to fuel startup technology companies, making more businesses eligible for the job creation and job retention tax credits, creating a new credit to attract the film industry, and starting a credit to help local governments promote urban revitalization.

But the impact of increasing the technology credit from $30 million to $45 million will be delayed from three to five years, according to Strickland's budget plan released Monday. And the downtown revitalization credit can't be claimed until 2013, when it is expected to cost about $12 million in state revenue. The governor's office said Friday the tax credits would be available immediately but did not explain the discrepancy regarding the two credits in the budget document. "All of these will be available immediately to help create jobs and economic development in the state," said Strickland spokeswoman Amanda Wurst. "Because of the way they are structured they won't have a budgetary impact until years later."

Republican lawmakers said it was unusual to propose tax credits that wouldn't have an impact on revenue until future years. "It does seem curious to offer something that isn't available in the cycle that we're authorizing over the next two years," said state Rep. Ron Amstutz, a Republican from Wooster. Amstutz said he wanted to give Strickland the benefit of the doubt and give him time to explain the delayed tax credits. But he described himself as "cautiously concerned" that the delay could encourage businesses to delay their investment, which undermines the state's economic recovery plans to spur investment as quickly as possible. "I think some of the economists might criticize that approach because it might have a dampening effect on the short term investment," Amstutz said.

Department of Taxation spokesman John Kohlstrand said the downtown revitalization credit could still attract investment because it lets businesses know tax credits are coming through a specific year-by-year schedule. State Sen. John Carey, a Wellston Republican who chairs the Finance Committee, said it was unusual to include tax credits in a budget proposal when the revenue impact wouldn't be felt until future budget years. Carey also noted the possibility that there could be a different governor by the time lawmakers have to consider the fiscal impact of the two tax credits. Strickland is up for re-election in November 2010.

Two years ago, Strickland opposed the use of business tax credits. His tax commissioner, Rich Levin, said in early 2007 that Ohio should resist putting additional loopholes in tax law to give some businesses special treatment. The state began a five-year tax reform effort in 2005 - continued in Strickland's latest budget plan - aiming to reduce the number of loopholes and complications in the tax code.