News and Tribune

January 31, 2014

Merger questions begin for business tax cut bills

Neither House nor Senate plan offers means to replace lost local revenue

By Chelsea Schneider
Evansville Courier & Press

INDIANAPOLIS — Indiana lawmakers now face the task of bringing together separate strategies on cutting a business tax that sends revenue to local government as measures passed the Indiana House and Senate on Thursday.

The plans take vastly different paths to cut Indiana’s business personal property tax.

The House’s version gives local counties an option to exempt the tax from new equipment and machinery. The Senate’s plan eliminates the tax for small businesses, but focuses more on an additional cut to Indiana’s corporate income tax that serves as a revenue source for state government.

Despite mounting concern from local government officials, neither plan offers a mechanism to replace revenue Indiana municipalities and schools anticipate to lose. Evansville Mayor Lloyd Winnecke joined several other mayors in Indianapolis this week to meet with Gov. Mike Pence on what the local government leaders perceive as the negative effects to a potential tax cut.

Senate President Pro Tem David Long, R-Fort Wayne, said he expects the process to go to the end of the General Assembly session and that conversations have centered on how to make local government as whole as possible.

“Most important thing in my eyes right now is not to handicap local government,” Long said. “We’ve been tough on them with our property tax caps and intentionally so. It is requiring them to innovate and to streamline their services and what not. There’s a line between trying to tighten the reigns a little bit on local spending and harming their ability to provide services. That’s a line we can’t cross. Everyone is aware of that.”

Both Republican-backed measures passed their respective chambers largely on party lines, though four House Republicans joined Democrats to vote against the proposal. In the Senate, one Democrat joined Republicans in passing the measure.

The House’s plan allows a county income tax council to adopt an ordinance to exempt the tax from new investments. The Senate’s plan would reduce the tax to local governments by $25 million by only exempting businesses with less than $25,000 of personal property tax. The proposal also would lower the state’s corporate income tax rate to 4.9 percent by 2019, which is anticipated to cost the state $131 million at full implementation.

The sponsor of the Senate’s bill, state Sen. Brandt Hershman, R-Buck Creek, said past actions by the General Assembly to boost the state’s tax climate are working.

“Let’s continue the fight, continue to compete and continue to make Indiana the destination of choice for economic growth and investment,” Hershman said.

Yet, state Sen. Lindel Hume, D-Princeton, said he doesn’t think cutting the tax will create jobs.

“The governor wanted to eliminate the personal property tax but didn’t want to shift it to anyone else or create a burden to local government,” Hume said. “Well that’s quite a conundrum.”