Indiana Gov. Mike Pence threw his support behind House Republicans' watered-down business tax proposal Tuesday amid outcry from local leaders over the potential to damage their already cash-strapped budgets.
Pence originally sought the elimination of the state's business personal property tax, which is levied on business equipment, when he announced his 2014 legislative agenda last month. But Chris Atkins, director of the Office of Management and Budget, told members of the House Ways and Means Committee that the governor would back an alternative measure crafted by House Republican leaders.
"I'm here with you to share the governor's support for House Bill 1001," Atkins said. "He believes that while we made substantial progress on our tax climate in recent years, the business personal property tax remains an outlier that we need to deal with if we're truly going to attract jobs and investment moving forward."
The announcement marks one of the first clear signs of what the governor is seeking on an issue that's been at the center of his legislative agenda.
Pence wrote in his 2014 policy "roadmap" that he wanted to "eliminate the business personal property tax to spur new investment." But as opposition among local leaders grew, Pence began saying he would support a "phase-out" matched with undefined aid for localities.
Absent a proposal from Pence, Republican legislative leaders crafted their own proposals. House Speaker Brian Bosma, R-Indianapolis, announced the chamber's plan would give counties the option to eliminate the tax on all new business equipment.
Senate Republican leaders, including the chairs of the tax and budget committees, submitted their own plan that would eliminate the personal property tax for small businesses and cut the corporate income tax. Atkins made no mention of the Senate plan on Tuesday.
The House bill's author, Rep. Eric Turner, R-Cicero, called the business tax one of the worst for the economy because it stalls the type of business growth and expansion lawmakers should encourage.
"The problem with the business personal property tax is it taxes capital investment," he said.
Chad Pittman, executive vice president for the semi-private Indiana Economic Development Corp., said the state is at a disadvantage when competing for jobs with neighboring states such as Illinois, which have eliminated the tax.
But the complete elimination of the tax, which is used to fill local coffers, came with a $1 billion price tag and no clear way to cover the budget holes it would create at the local level.
A parade of Indiana mayors told the panel those states found ways to refund localities the money lost without the tax. Evansville Mayor Lloyd Winnecke, a Republican, noted that a referendum being placed before Michigan voters also provides for replacement funding from the state.
"We hear that surrounding states have eliminated the business personal property tax, but let's not leave out this one important piece of the question," he said.