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Education Tax Policy Institute Cites Flaws in Tax Foundation Report.

State rankings do not reflect actual tax climate

COLUMBUS, Ohio Columbus is the capital and the largest city of the American state of Ohio. Named for explorer Christopher Columbus, the city was founded in 1812 at the confluence of the Scioto and Olentangy rivers, and assumed the functions of state capital in 1816. , Sept. 3 /PRNewswire/ -- The Education Tax Policy Institute (ETPI ETPI Eastern Telecommunications Philippines Inc. ) says that the recently released Tax Foundation Report, citing Ohio residents as having the 7th highest state and local tax burden in the country, is based on a highly subjective methodology, and is not a true representation of Ohio's business-friendly tax environment.

"The fundamental flaw of the Tax Foundation's report is that it is based on a series of non-standard and poorly documented adjustments to each state's taxes rather than measuring the actual level of taxes," said William William, crown prince of Germany
William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack
 Driscoll Driscoll is one derivation of the Irish surname "O'Driscoll". It originates from Cork in the Republic of Ireland. Most O'Driscolls and Driscolls live in Ireland, with many more living in the United States, Canada and Australia. , a consultant for the Education Tax Policy Institute. "The result is a subjective and inaccurate measurement of which state has higher taxes and which ones are truly more business-friendly."

An analysis of the Tax Foundation report issued by the ETPI ( ) cited four main areas where the methodology is fundamentally flawed flaw 1  
1. An imperfection, often concealed, that impairs soundness: a flaw in the crystal that caused it to shatter. See Synonyms at blemish.

  1. The actual construction of the tax climate index is based wholly on
     subjective judgments made by the Tax Foundation relating to the
     taxation policies of other states and the estimated consumption
     patterns of its residents. The Tax Foundation attempts to justify its
     approach by appealing to economic theory, but the methodologies used in
     this report constitute significant departures from accepted models.

  2. While the Tax Foundation does describe its methodology and lists
     references, it never actually shows the computations by which it
     derives its results. Replication of the Foundation's study thus becomes
     impossible, and no way exists to assess the Foundation's assumptions,
     critique the details of the computations, or evaluate their accuracy.

  3. Based on the Tax Foundation's methodology, Ohio's "tax burden" results
     from tax policy decisions made in other states.

  4. The methodology is inconsistent in the extent to which it takes into
     account future tax changes, which have already been enacted in the
     Buckeye state.

The ETPI analysis suggests that objective methodologies, such as those used by the Federation of Tax Administrators ( ), are a more accurate picture of a state's true tax climate. The latest reports available using this methodology show Ohio as much closer to the middle for state and local tax burden. For example, Ohio is ranked 24th in terms of state per capita [Latin, By the heads or polls.] A term used in the Descent and Distribution of the estate of one who dies without a will. It means to share and share alike according to the number of individuals.  and 18th for percentage of personal income.

Because of timing issues, it is unclear to what extent the Tax Foundation Report accounts for Ohio's five year plan to restructure business taxes. The ETPI analysis shows that in the upside-down world of the Tax Foundation, major net reductions in Ohio business taxes benefit non-residents more than Ohioans.

Ohio business analysts echo the criticism of the Foundation's analysis as flawed and impractical im·prac·ti·cal  
1. Unwise to implement or maintain in practice: Refloating the sunken ship proved impractical because of the great expense.


"It is completely illogical that the Tax Foundation methodology would punish pun·ish  
v. pun·ished, pun·ish·ing, pun·ish·es
1. To subject to a penalty for an offense, sin, or fault.

2. To inflict a penalty for (an offense).

 the state of Ohio for enacting sweeping tax reform designed to increase the global competitiveness of Ohio companies through the elimination of the corporate franchise tax, elimination of the tangible personal property tax, along with a reduction of the personal income tax rate by 21 percent," said Ed Burghard, executive director of the Ohio Business Development Coalition, the nonprofit organization Nonprofit Organization

An association that is given tax-free status. Donations to a non-profit organization are often tax deductible as well.

Examples of non-profit organizations are charities, hospitals and schools.
 that markets the state for capital investment.
  Ohio's tax reform package benefits businesses by:

  -- Reducing operating costs - No tax on inventory or corporate income
  -- Enhancing productivity - No tax on investments in machinery and
  -- Attracting talent - Shrink labor costs through a 21 percent reduction
     in personal income tax
  -- Creating a level playing field - All companies taxed the same low rate
  -- Boosting return on investment - No tax on products sold to customers
     outside Ohio
  -- Rewarding entrepreneurship - First $1 million in gross receipts are

Independent, third-party economic models project that by 2010, Ohio's tax reform will grow the state's economy by increasing gross state product by $5.6 billion and personal income by $3.6 billion. It also is expected to lead to an additional $6.3 billion of new capital investment in Ohio's economy.

With its revamped tax code, Ohio's state taxes are on track to be the lowest in the Midwest for companies making new capital investments. Projections show that by 2010, Ohioans will see a real world impact of up to a 63 percent reduction in tax burdens. Just three years after implementation, the new tax code is already growing the state's diverse economy, improving the standard of living and enhancing Ohio's standing in an increasingly competitive market.

About the Education Tax Policy Institute

Formed in 1997, the Education Tax Policy Institute provides school districts, local governments and policy makers with the ability to acquire data and to project the outcome of tax changes on education funding and on local government resources. For more information, visit .

For more information about Ohio's tax climate, visit .

CONTACT: Dace de la Foret, +1-614-224-8114, ext. 235,, for Education Tax Policy Institute

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Date:Sep 3, 2008
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