hen judges declare a state's tax incentives program unconstitutional, there's really only one way for a state to fight back:
      Rewrite the tax law.
      That's exactly what Ohio Gov. Robert Taft is doing, as he seeks to reverse manufacturing job losses and transform the Buckeye State into a globally competitive location for 21st century manufacturing plants.
      Coming on the heels of the controversial Cuno v. DaimlerChrysler ruling by the U.S. Court of Appeals for the Sixth Circuit — which struck down Ohio's franchise tax credit for qualifying employers — Taft's bold tax reform package has been called the most sweeping in state history.
      The Republican governor's plan would cut personal income tax rates by 21 percent over five years; eliminate state income tax for Ohioans making less than US$10,000 a year; and phase out the tax on equipment and inventory and the corporate tax, replacing them with a broad-based, low-rate commercial activity tax. Taxes would also rise on alcohol, cigarettes, gasoline and electricity.
      "It's time to reform our tax system to reflect the economy of right now and tomorrow, not the economy of yesterday," Taft said in his Feb. 8, 2005, State of the State Address. "It's my number one priority."
      It's also the top priority of the Ohio Manufacturers Association, which on March 2 gave the governor's tax plan a strong endorsement.
      "Clearly, the governor recognizes that a strong manufacturing sector is vital to Ohio's overall economic health," said David Johnson, chairman of the association and head of Summitville Tiles Inc. in Summitville.
      Endorsements for the Taft plan are coming in from all corners of the state. The Ohio Business Roundtable, Ohio Chemistry Technology Council, Ohio Farm Bureau, Ohio Society of CPAs and Ohio State Medical Association have all endorsed the plan.
      "This is Ohio's opportunity to really turn around the tax code in a way that can improve

Bob Lapp, vice president of government affairs for Canton-based Timken

business and opportunity in the state," says Bob Lapp, vice president of government affairs for Canton-based Timken, one of Ohio's largest manufacturing companies.
      "For decades, part of the problem in Ohio has been our tax code that penalizes investment in machinery and equipment. This will eliminate the property tax on machinery, equipment and inventory," says Lapp, whose company reported record revenues of nearly $5 billion in 2004. "For a company like Timken, that is our bread and butter. Why tax the companies that you need in order to be competitive? It makes much more sense to tax based upon consumption."
      Under Taft's plan, 5.3 million Ohio taxpayers would see a personal income tax cut. About 550,000 low-income Ohioans would have their entire income tax burden eliminated. About 300,000 small business owners in Ohio would see their tax rate reduced by 21 percent.
      Some 13,000 Ohio companies would no longer pay the machinery and equipment tax — a tax that Lapp says unfairly punishes capital investments and expansion, particularly by Ohio's manufacturers, who directly or indirectly employ half of all Ohioans.
      About 40,000 Ohio businesses would no longer pay the manufacturers' and retailers' inventory tax; and an estimated

The Ford Engine Plant in Cleveland is part of a huge automotive cluster in Ohio. Pending tax law reform should attract even more automotive manufacturers.

250,000 small and emerging Ohio businesses would pay only the $100 minimum fee of the new Commercial Activity Tax.
      The plan would also remove a huge albatross: the impact of the decision.
      "That court ruling is one issue that, if the governor's tax plan passes, will be resolved for us," Lapp said. "Cuno will basically go away. By taking away the personal property tax, the abatement incentive ceases to be an issue. essentially becomes irrelevant."
      The reform package does more than remove a legal hurdle, however, Lapp noted.
      "The governor's plan gives Ohio an advantage. This will be a big shot in the arm for Ohio and make Ohio's manufacturing climate much more attractive than ever before. This new tax system will be much more fair across all business sectors."
      The package is moving toward completion through the state House. As of press time, the tax plan was being debated by the House Ways and Means Committee. While some minor changes are expected, the bulk of Taft's proposal is expected to become law.
      The only statewide opposition appears to be coming from a coalition of government employees called the Campaign to Stop Ohio's Slide (SOS), including the Ohio Federation of Teachers, Ohio Head Start and Ohio State Troopers Association. The coalition claims that the tax cuts "unfairly" benefit Ohio's wealthiest residents and potentially take money out of local government coffers.