School funding plan may help businesses

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Associated Press COLUMBUS _ While some lawmakers were struggling to come up with a way to convince voters to swallow an increase in the state sales tax to improve Ohio's schools, others saw an opportunity to cut taxes _ at least for businesses. Sen. Roy Ray, R-Akron, told reporters Wednesday that Republicans are working on a plan to reduce the state's tax on inventories _ a move long sought by businesses. One proposal would reduce the percentage of inventory subject to the tax _ which generated about $600 million last year _ by 1 percent a year for the next 10 years, eventually reducing the assessment to 15 percent. Ray, though, said he wants to see the inventory tax phased out entirely over 25 years. Businesses pay personal property taxes on their inventory, machinery, equipment, office furniture and fixtures. School districts receive about 70 percent of this tax money, with the rest divided among counties, cities, villages and townships. Ray's comments came as legislators held a second day of hearings on a Republican plan to come up with a school-funding system to replace the one declared unconstitutional in March. The proposal, based on higher cigarette taxes and a penny-per-dollar increase in the state sales tax, would raise an extra $1 billion for Ohio's schools. Democrats were wary of the idea. ``I don't think we ought to buy a pig in a poke,'' said Sen. Leigh Herington, D-Kent. Herington noted that Democrats already feel that businesses are not paying their fair share of higher school taxes. Even a key House Republican who generally supports the idea questioned the timing. ``I think this is going to be challenging enough without people thinking this is a free-for-all and that everything associated with our system of taxation is fair game,'' said Rep. E.J. Thomas of Columbus. ``I'd like to take a look at what they're talking about, but it's a Senate thing at this point,'' added Thomas, chairman of the House Ways & Means Committee, which deals with tax issues. Backers of the reduction in the inventory tax say overall tax receipts would actually increase under the plan. That's what happened last time the state cut its inventory tax, said Donald Berno, executive director of the nonpartisan Ohio Public Expenditure Council. When the Legislature voted in 1983 to reduce the amount of inventory subject to the tax by 10 percent over 10 years, overall tax receipts increased every year, Berno said. And if increased economic activity does not offset the tax cut in any year, the assessment would not be reduced, Ray added. Business groups have long argued that the tax puts them at a disadvantage when trying to compete with companies located in states _ including Illinois, New York and Pennsylvania _ that do not tax inventories. But Tom Hart, lobbyist for the Ohio Manufacturers' Association, said reducing the inventory tax accounts for only a part of his group's interest in the school-funding debate. ``Sure we want the inventory tax cut,'' Hart said. ``But without structural changes in education, you won't improve quality. ``Our people are doing a whole lot more remedial work in math and reading at their plants after the shifts end than anyone can imagine.''

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