Gov. John Kasich and officials at the state Department of Taxation recently righted a wrong. They ended the practice of waiting for businesses to request their money back for overpaying on the commercial activity tax. Now the state will generate automatically a refund.
That is as it should be. The state shouldn’t bank money that a taxpayer of any kind doesn’t owe.
As Joe Testa, the state tax commissioner has noted, the new practice has translated so far into refunds for more than 3,500 businesses, the amount exceeding $13.7 million.
The move also deserves some perspective, the state having done much the past decade to ease the tax burden on businesses. The commercial activity tax was part of a 2005 overhaul of the way the state taxes businesses, replacing the antiquated tangible personal property tax and the carved-up corporate franchise tax, essentially on profits.
What appeals about the commercial activity tax, a levy on gross receipts, is its broad base and low rate. Worth adding is that state lawmakers hardly made the change revenue neutral. The commercial activity tax generates roughly $1.5 billion a year less than the two taxes it replaced.
That’s right, in the neighborhood of $3 billion less for the biennium, or no small sum in view of the spending cuts absorbed by public schools and higher education, not to mention cities, libraries and counties. So, yes, the state has done the right thing with the refunds. It also has done much more for businesses in the state.