Driving business: Ohio's auto industry.

The automobile industry and the State of Ohio are close partners. The state's auto industry ranks second in the United States in automobile production, generating 1.7 million light vehicles each year and $20 billion in activity. Ohio also ranks first in the country in the number of auto suppliers.

Despite the challenges, Lt. Gov. Bruce Johnson, who also serves as director of the Ohio Department of Development, sees Ohio's auto industry as thriving.

"Ohio is home to many companies that provide world-class equipment, products and services to the automotive industry, and ranks first or second in the nation in the export of automobiles, engines, wheels and auto parts," he says. "With more than 200 tier-one suppliers strategically located across the state, Ohio manufacturers provide products to automakers including Honda of America, DaimlerChrysler, Ford and General Motors--all companies that continually reinvent themselves by using new technologies and processes."

Ohio's economic history was built on a foundation of manufacturing--obviously a major aspect of the auto industry--and since the early '90s, the state has grown into the nation's third-largest manufacturing economy. This translates into an environment that has become even more attractive to companies seeking new investment and growth, says Johnson, but also presents some interesting political concerns, especially in taxation.

For example, Johnson recently visited various Ohio cities to promote the state's new business tax plan that will radically shift from an antiquated tax structure that previously taxed profits, equipment and inventory. The end result represents a huge advantage to the capital-intensive auto industry.

"Ohio's new business tax reforms are eliminating the corporate franchise tax and taxes on inventory, as well as eliminating taxes on manufacturing machinery and equipment," says Johnson. "The state is phasing in a broad-based, low-rate Commercial Activities Tax on business receipts that we expect will create a tax system more in tune with the realities of today's economy."

Johnson says for years, Ohio's tax code put an unfair burden on its manufacturing industry. Today, the state is committed to attracting investments and helping companies be more competitive. As a result, other pending tax proposals include exempting the first $150,000 in small businesses' gross receipts, with the first $1 million in gross receipts subject to a minimum tax of $150.