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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2009 > September > 21 > Entry
Editorial: Grocers milked tax argument in absurd way
You do not want to read the Ohio Supreme Court ruling that says grocers have to pay the state’s relatively new business tax.
The 28-page decision is bor-ring, even as court rulings go.
You, however, might want to know what the ruling means for your favorite grocery store: It, like pretty much all businesses, will have to pay a tax that amounts to 26 cents on every $100 of gross receipts over $1 million.
In a 6-1 ruling, the all-Republican court said last week that grocers owe the money even though the state constitution is explicit that food can’t be taxed.
Proponents of the tax — which included Republicans and Democrats — argued that it is a business tax, not a food tax. Tying the levy to gross receipts was simply a measure — a yardstick of sorts — of business activity, not a tax on the food itself.
The justices said it’s well established that businesses can be taxed for the “privilege” of doing business in the state.
Grocers, on the other hand, had argued that the state couldn’t tax their activity without bumping into the actual food on their shelves. That distinction was extremely important to them, because they’re a high-volume, low-margin business. The tax — even though it has an exceedingly low rate — can add up in their case.
Even granting this concern, it was always a stretch to conclude that when Ohioans amended the constitution and definitively made food tax-free that they had this sort of tax in mind. The more believable, the more logical objective was to exempt food from a direct tax, such as a sales tax, at the check-out counter.
If the Republican governor and legislature — who were in charge when the tax was imposed — and a Democratic governor who advocated to keep the tax are missing something about its peculiarly onerous effects, then grocers need to document that case.
The CAT — or Commercial Activities Tax — was billed as a broad-based, low-rate levy that requires all businesses to pony up in an equitable way.
If that’s not now turning out to be the case, then let’s have that discussion. But simply saying that a whole industry is exempt from what is now Ohio’s main business tax isn’t a winning strategy.
The court’s decision is especially good news for Gov. Ted Strickland. More than $700 million was at stake. (That’s the total that would have had to be refunded for taxes paid since 2005, and the estimated amount grocers will pay during the current two-year state budget.) Given how iffy the state’s revenues are, the court’s decision was welcome.
But there’s no reason to believe the court was trying to do the state a favor or that it knew what it wanted to do and then set out to find a rationale. It makes perfect sense that the Republican justices gave the legislature the benefit of the doubt and that they would be reluctant to make the leap the grocers’ argument required.
The end result was right, and probably should have been foreseen.
Permalink | Comments (9) | Post your comment | Categories: Editorials, Ellen Belcher, Ohio government, Ohio politics
Comments
By Craig
September 21, 2009 6:23 AM | Link to this
The end result is higher food prices to consumers. Why do politicians think that they can “tax” businesses when really they are taxing those who buy from those businesses?By Benjamin Jones
September 21, 2009 8:20 AM | Link to this
When in the hell will you pinheads (DDN editorial writers, politicians, etc) realize that if it looks like a duck, acts like a duck and makes a sound like a duck - it must be a duck! Clear and simple … levy a tax on a business translates to a tax on the consumer. You can say it is not a tax on food, but, get serious folks, it will be passed down to consumers. Hence, consumers pay the tax. Poop rolls downhill (and who sits at the bottom of the hill?) $700 millon more dollars from consumers to fund the state. Just stop spending. The state is not immune from the same recent consumer wrath levied against the federal government for their deficit spending. Start laying off the unnecessary extra layers of state employees if you want to avoid these obscene deficits.By Cris
September 21, 2009 10:10 AM | Link to this
Thank you for the interesting details in your editorial. I applaud the justices for taking an original/textual approach to interpretting the law. Decide based on the text of the Constitution and the laws, regardless of the outcome. This is the approach our federal Supreme Court is taking. The approach is particularly challenging for justices who must be re-elected by the People. But it’s appropriate that the OH Supreme Court limited its role, leaving it to our Legislature and Governor to fix an undesirable result. The CAT needs re-debate, and amended. (Personnally, I think a Gross Receipts tax is bunk, and should be junked. Similarly, the Municipal Commuter Wage Income tax is a Gross Income tax, and should be changed or junked.)By Confused
September 21, 2009 10:27 AM | Link to this
I guess I’m confused. I, like most of you, would love to take home all of what I make in my check and not pay any taxes, but how do you propose to pay for government? Income tax and this business tax is the primary funding mechanizm for goverment. Without it, there would be no state government. Are you suggesting that is OK…no state government? You probably aren’t goning to jump out there and offer any alternatives. It’s much easier to just sit back and complain!By Cris
September 21, 2009 12:34 PM | Link to this
TO: Confused The issue is a GROSS tax versus a net/adjusted tax. The CAT is a GROSS RECEIPTS tax, so the business would have to pay even if it had a loss for the year. The federal tax on business income is a NET tax; the tax is a percent of the profits (of Receipts minus Expenses) rather than of the Gross Receipts. Think about different business. Some operate on lot smaller margins than others, yet both pay the same Gross Receipts tax. Similarly, many MUNICIPAL/City COMMUTER WAGE Income Tax (CWIT) are a GROSS Income Tax. (Maybe all are gross taxes.) The State income tax is based on your ADJUSTED Gross Income (AGI), the bottom of page 1 of Federal 1040. So, your gross wage income is reduced by your federal and state standard deductions. (The Federal AGI then uses the 1040 to add net income from other types of income e.g. capital gains; these are not taxed by a CWIT.) My philosophical problem with the CWIT is less about the Gross nature and more about the Individual assessment method; i.e., it is charged to individuals instead of the BUSINESS. This distorts assessment levels since it is Taxation without Representation, since Commuter employees can’t vote against tax increases (or for them, or for whether the assessed tax is used for police vs road vs whatever). Voting with your feet by changing Employers works somewhat, producing population movement to exurbs, then CWIT policies seem to try to follow the population, gradually increasing the number of Municalities with an Income tax and the Tax Rate at the innermost municipalities. Summary: The business has a tax on its GROSS RECEIPTS; not able to deduct the expense of salaries. That salary is taxed as an individual Gross Receipt. My preference: Business should be able to deduct their expenses, paying taxes on only their profits and paying them to the government unit (federal, state, municipal) in which they reside. Individuals should only be taxed by government units in which they vote in: federal, state, school district, and only their resident municipality (not commuting employer’s municipality). Even with this simplication, I’ve listed 4 tax units with whom to file by the individual.By WAR
September 21, 2009 1:14 PM | Link to this
Yep, here we go again. Bush’s regeame (nope l don’t know how you spell it) Wiped out lots of the poor and elderly people by allowing the drug and medical profession to raise prices. ( to pay for their political contributions. ) Now our polititions want to get rid of the rest of the peons, elderly and poor, by making food too costly for them. Hell is gonna be so pact with politions that there wont be room enough for the other crooks. Oh yea, stop giving away food to ILLEGAL aliens. This is paid for out of our tax money.By Harvey
September 21, 2009 1:27 PM | Link to this
I agree that the CWIT taxes on commuters amount to taxation without representation. Either get rid of them, or give those commuters the right to vote on the city councilperson representing the area their office is located, as well as all city-wide issues and candidates! I guarantee that would get rid of McHat…By Bill
September 22, 2009 9:53 AM | Link to this
Local Police and Sheriff Departments are laying off patrols and parking cruisers. Cuts to Fire and Street Depts. are constantly in the news. Yet people complain of poor response times and potholes. Don’t make me pay taxes public employees should all be “volunteers”, and pay for the gas for those fire trucks. tiny minds, just tiny little mindsBy ironmyke
September 23, 2009 12:11 AM | Link to this
Nice end run. The Ohio legislators were pretty clever figuring out how to get tax revenue out of the food sector of the state’s economy while circumventing the 1930’s state constitutional bar on taxing food- by taxing the food sellers. That way the consumer pays the tax in the form of higher prices, but doesn’t get antagonized about it every time he looks at his grocery receipt.