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Phase Out of TPP in Ohio and the Commercial Activity Tax

5. Phase Out of TPP in Ohio and the Commercial Activity Tax

In 2006, Ohio began a three-year phase out of its non-utility TPP taxes – the phase out of utility TPP taxes began in the following year 14 (Mughan & Propheter 2017; Collins 2015). TPP taxes were replaced by the Commercial Activity Tax (CAT), 15 a graduated, commercial gross receipts tax imposed on corporations (Mughan & Propheter 2017; Collins 2015; Tax Foundation 2015). The phase out of TPP taxes in Ohio occurred in three stages: (1) the state exempted new manufacturing machinery and equipment purchased on or after January 1, 2015; (2) for existing businesses, the assessment ratio was reduced by 25 percent in each of four years, starting in 2006 and ending in 2009 16 (TPP was assessed at 25 percent of the value prior to the phase out); and (3) the phase out for telecommunications property took place over a longer period of time, starting in 2006 and ending in 2011 (Errecart, Gerrish, & Drenkard 2012; Collins 2015). The revenue from the newly created tax was allocated in three ways: 

  1. the general revenue fund (GRF); 
  2. reimbursement funds for school districts; and 
  3. funds for lo cal governments (Collins 2015).  

Nevertheless, the CAT only generated about half of the funds needed to reimburse school districts and local governments and, as a result, the state had to use GRF to supplement the reimbursement payments (Ohio Department of Taxation 2015; Collins 2015). In 2013, Ohio made subsequent changes to the reimbursement formula and the distribution of CAT revenue (Collins 2015). As a result, local governments and schools lost about 50 percent of reimbursement funds while the allocation to the GRF was almost doubled (Collin 2015; Mughan & Propheter 2017).

6. Michigan’s Phase Out of Industrial and Commercial TPP →

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