Ohio CAT Raising More Money than Expected

December 30, 2006

Ohio’s Corporate Activities Tax (CAT) is raising revenue faster than anticipated:

The new state tax on gross receipts, known as the Commercial Activity Tax, is bringing in about 20 percent more money than expected, and those unanticipated millions will automatically prompt a review by lawmakers and the governor’s tax commissioner next year.

Competing interests are following the developments.

Businesses that pay the tax are suggesting that if the trend continues, then a reduction may be appropriate.

This is not unexpected, as gross receipts taxes often raise substantial amounts of revenue–this is why they are favored by lawmakers. H.B. 66, the bill that created the CAT, was billed as revenue neutral–if not a tax cut. This estimate looks tenuous now.

It would not be surprising if Ohio-based businesses with all their sales in Ohio looked for relief soon, as they are shouldering the CAT’s burden. It also will not be long until companies start looking for specific carve-outs to reduce their burden.

See the Tax Foundation’s reports here and here on Ohio to learn more about the CAT and Ohio’s tax system.

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