By Ken Alltucker
The Cincinnati Enquirer

Greater Cincinnati companies warned that Gov. Bob Taft's plan to raise $2.3 billion by taxing services, property and profits will leave some firms at a competitive disadvantage and could even force some out of business.

The Taft tax plan takes aim at everything from corporate call centers to tattoo parlors in an attempt to overhaul a tax code that the administration says is out of date and unfair.

But Tristate companies say Taft's plan to reel in $996 million in the next fiscal year and $1.3 billion the following year largely through corporate franchise tax collections and by taxing business services is punitive.

"This approach of taxing services like this is the act of a desperate governor who has lost control of the state," said Rick Segal, chief executive officer of HSR Business to Business, a Sharonville marketing communications firm that would be taxed for its public relations efforts under the Taft plan.

The Ohio Land Title Association, the Ohio Association of Realtors and other business trade groups have lined up against Taft's proposal. The plan is "under review" by the Greater Cincinnati Chamber of Commerce, spokesman Ray Buse said.

One of the largest areas of reform targeted by Taft is changes to the corporate franchise tax. The administration says current law allows big business to avoid taxes, part of the reason that Ohio's per-capita corporate tax collections of $67 are almost half the $124 national average.

The franchise tax changes would generate $325.8 million in the first year, and $451.5 million in the second year.

The other major area of reform is adding taxing business services. Dozens of firms will be affected by this initiative, which is expected to raise $556.6 million in the first year and $706.8 million in the second year.

"This is unfortunate," said Michael Riedel, owner of Michael's Lawn & Landscape in Anderson Township. "I charge a flat rate for my work. This will be a detriment to attracting new clients."

Todd Hennessy, owner of the Skincraft tattoo parlor on Vine Street in Corryville, worries about the extra paperwork he'll have to fill out.

"As a small business person in this city, I'm already taxed enough," he said.

One of the major money generators under Taft's plan is real estate transactions. In the first year alone, taxing real estate agent commissions will generate $53.1 million.

Many agents say that ultimately will result in swelling closing costs for home shoppers. "Most Realtors would have to pass that on to the consumers," said Dale Weisker, a Cincinnati agent and former president of the Cincinnati Area Board of Realtors.

For example, a typical 6 percent commission on a $150,000 home would be $9,000. Apply the 6 percent sales tax in Hamilton County and the home buyer would pay $540 in sales taxes, Weisker said.

Real estate fees won't stop with the broker's commission. Title searches - a routine step of any home sale - also would be taxed.

Title search prices vary across the state, but the typical Cincinnati home buyer can expect to pay $100 to $200 for such services.

Dan Dozer, executive director of the Ohio Land Title Association, worries about the extra paperwork.

"We need (tax strategies) that will create the most dollars and not just a lot of paper shuffling," said Dozer, who figured a small title agency would contribute just $100 a month in new taxes.

Not only do commercial real estate companies face the added cost of taxes on real estate agents, those that are in the business of managing property for third-party owners would be taxed for their services.

Bob Fessler, senior vice president for Duke Realty Corp., Greater Cincinnati's largest landlord, said the costs likely would be shared by businesses and commercial property owners.

"That dog grooming career looks pretty good now, but I guess they're getting taxed, too," said Jeff Carey, a broker with Carey Laumer Commercial Realty. "Looks like nothing is safe."

Howard Duvall, owner of Deer Park Suede and Leather, said mom-and-pop businesses like his would suffer the most under Taft's proposal. Larger dry cleaning shops often are able to offer cheaper prices, so charging sales tax could be the last straw that prompts even more customers to shop elsewhere. "You don't tax a service," he said. "I'm not in favor of this at all."

E-mail kalltucker@enquirer.com