Increases in property and payroll taxes will be among the key business issues confronting the General
Assembly—again—when it convenes in January.
So it's little wonder those topics are among several the Indiana Chamber of Commerce are addressing Monday at its 2010 Legislative Preview, which runs from 11 a.m. to 1 p.m. at the Hilton Downtown Indianapolis.
Lawmakers meet Tuesday for Organizational Day, but they will not begin debating measures until the Legislature officially convenes for a short session beginning Jan. 5.
Although legislators addressed both property taxes and the business payroll taxes that underwrite unemployment insurance during past sessions, more work remains.
Take property tax caps, which the General Assembly approved in 2008. The caps, which limit property taxes to 1 percent of a home’s assessed value, 2 percent of a rental property’s value and 3 percent of a business’ assessment, will not become permanent until the Legislature approves a proposed constitutional amendment twice, in consecutive years. Lawmakers approved the amendment in 2008 but failed to do so again during the 2009 session, meaning the process starts over. Once that hurdle passes, the caps must win approval from voters in an election before they can become law.
The state chamber favors uniform property assessments and argues that the new formula would place too much of the burden on the business community while stymieing job creation, said Cameron Carter, the chamber’s vice president of small business and economic development.
“We agree that we need to protect property taxpayers, but we disagree with the ‘1-2-3 lock,’” he said. “We just don’t think it’s good for economic development or the prosperity of businesses.”
House Speaker Pat Bauer, D-South Bend, likely will allow a vote on the caps this session, since the measure would need to be passed again before advancing to the public, said Ed Feigenbaum, publisher of Indiana Legislative Insight.
Democrats favor tax caps but do not want them to become part of the Constitution because that would make it harder to change the property-tax formula later.
Both parties, however, likely will favor delaying the increase companies will pay in payroll taxes. Lawmakers this year raised the tax on employers effective Jan. 1 and made other changes to help keep the Unemployment Insurance Trust Fund solvent.
The state has borrowed about $1.1 billion so far from the federal government to keep the fund afloat, a figure expected to climb to $1.7 billion by year’s end. Back in 2000, the fund enjoyed a $1.6 billion surplus but has been depleted by rising unemployment rates.
But raising taxes on businesses at a time when the economy is struggling to gain traction might not make the best political sense. State legislative leaders already have acknowledged that they’re likely to support a bill to delay the tax hike by a year.
The state chamber prefers a two-year delay but certainly backs any postponement, Carter said.
In exchange for their support, Democrats likely will request something in return, such as tying any delay to a job-creation stimulus package, Feigenbaum said.
“There’s an opportunity for Democrats to take a little bit of a political advantage on this,” he said.
Also, the state chamber hopes to build upon local government reform measures recommended early this year by Indiana Supreme Court Chief Justice Randall Shepard and former Gov. Joe Kernan in their non-partisan Kernan-Shepard report. Gov. Mitch Daniels championed the changes, some of which resulted in legislation intended to save money by consolidating government functions.
Voters in Marion County, for example, approved consolidating property assessment, doing away with township assessors. Now, one county executive has responsibility for the assessment of all property in the county.
Feigenbaum expects Daniels to propose further consolidation, moving township oversight of fire protection to a county-wide board.
“It doesn’t sound like much,” he said, “but that sets the stage for leaving the township trustees and advisory board with [just] poor relief.”
Overall, Feigenbaum said, the next legislative agenda could be much fuller, particularly in a short session, than many might expect.