Are Business Taxes in Cleveland Out of Line?

Critics maintain that state and local taxes on Ohio businesses have a disadvantageous effect on the Cleveland area economy because they impose disproportionate burdens on new and cyclically sensitive firms in capital-intensive industries. Such firms are thought to be particularly important to the maintenance and future growth of the Cleveland economic base. The author utilized the "representative firm" approach to assess the burden of all state and local taxes on a typical durable goods manufacturing firm in Cleveland, as compared to eight other states. He found that taxes on the Ohio corporation ran about 10 percent higher than in the comparison states in a normal year. The relative burdens appear no greater for new firms or those at the trough of cycles. Since tax levels are a rather negligible factor in industrial location decisions, the modest tax disadvantages that characterize Ohio do not appear to call for major fiscal reforms in the interest of industrial development.