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On June 30, Gov. Bob Taft signed the 2006-07 budget that limits state spending to its lowest level in 40 years. The $51.25 billion budget contained numerous tax reforms aimed at improving Ohio's business climate and growing the state's tax base.

The new budget phases out two major business taxes – corporation franchise and tangible personal property – and phases in the new commercial activity tax (CAT). These changes are expected to result in overall tax relief for most Ohio farmers, said Rocky Black, director of OFBF's legislative affairs. He noted that OFBF is working at generating support for an exemption to the CAT for grain operators who often have high sales and low profit margins.

A look at the various taxes and when they will be implemented or phased out, according to the Ohio Department of Taxation and various experts:

• Commercial activity tax – The CAT is a new tax effective July 1 that is measured by a business's gross receipts. Businesses with annual gross receipts of $150,000 or less are not subject to the CAT. Those with receipts from $150,001 to $1 million will pay a $150 tax. Those with more than $1 million in annual receipts will be taxed at a rate of .26 percent. (The tax rate for the first tax period from July 1 to Dec. 31 is .06 percent.) Businesses subject to the CAT must register by Nov. 15 and pay a $20 fee ($15 if registered online at http://obg.ohio.gov/). Paper applications will be available at http://tax.ohio.gov. The first CAT returns must be returned by Feb. 10.

• Personal property tax – This tax is phased out on most business inventory, manufacturing machinery and equipment and furniture and fixtures over four years beginning in tax year 2006. Manufacturing machinery and equipment not used in businesses before Jan. 1, 2005, is not subject to taxation.

• Corporation franchise tax – This tax will be phased out by 20 percent annually between 2006 and 2010.

• Personal income taxes – These taxes will be reduced a total of 21 percent or 4.2 percent per year for five years, starting with tax year 2005.

• Sales tax – On July 1, the state sales tax dropped from 6 percent to 5.5 percent.

• Cigarette excise tax – On July 1, this tax increased 70 cents to $1.25 per pack of 20 cigarettes.

• Real property tax – The 10 percent rollback in real property taxes for most commercial and industrial property is removed. The rollback remains for residential and agricultural real property. The change is effective with the 2005 tax year and will be reflected on bills paid in 2006.

• Kilowatt hour tax – A proposal to increase this tax by 30 percent was rejected.

• Real estate transfer tax – A proposed 1-mill increase in this tax was turned down.

• Estate tax – Legislators rejected a federal "sponge" tax, which would have piggybacked on a federal estate tax.