Opinion and Viewpoint

FRIEDMAN: Tax cuts undermine prosperity

April 26, 2014

FriedmanState Sen. Brandt Hershman, key sponsor of the reduction in state corporate and bank taxes, is still insisting that more business tax cuts are the way to prosperity.

Fortunately, many in the GOP disagree with the senator—namely local GOP officials who successfully fought against eliminating the business personal property tax. They say that more tax cuts are simply “old-style economic development” and not the key to success.

Hershman and a few supply-siders keep gushing that Indiana’s low-tax, weak-regulation brand of economic development has turned Indiana into the “envy” of the nation. He can be “Illinoyed” all he wants, but the studies don’t lie. Illinois, even with its higher tax environment, has far outpaced Indiana in economic development, pulling in more than three times as many significant business investments last year, according to Site Selection Magazine.

Illinois ranked third by attracting 383 projects involving more than $1 million in investment or at least 50 jobs, according to the publication. Indiana had just 103 projects, which was 60 fewer than all of our neighboring states and second-to-last per capita in the Midwest.

So for 20 years of merciless tax cutting of all sorts of business taxes including inventory tax, corporate income and myriad other giveaways packed into our tax code, Indiana is not “on the move” or “leader of the pack.” Nor are “others struggling to catch up with us.”

By gutting our revenue base, supply-siders have eviscerated our ability to provide the kinds of things businesses say they really want—like a high-quality, well-educated work force and top-flight roads and bridges to move products to market.

Supply-siders should heed Republican mayors like Blair Milo in LaPorte who in a letter to Gov. Pence and copied to legislators said that “for Indiana to best compete as a state, our tax climate must be balanced … failing infrastructure and diminished services that cannot assure businesses a sound climate for their success will quickly discredit any advantage gained by a decrease in taxes.”

Quoted in Howey Politics, Republican Mayor Duke Bennett of Terre Haute said that if the state had eliminated the business personal property tax, “We can’t be an economic engine … If we don’t have good police, fire, streets and parks, people aren’t going to want to do business in Terre Haute …”

That’s the sound of common sense coming from Republicans and Democrats who want a balanced, appropriate strategy to lure and keep business.

Goshen Mayor Allan Kauffman, a Democrat, also quoted by Howey, said, “It doesn’t seem sustainable that we can be the lowest-tax state in every category and still maintain quality of place that attracts skilled workers or retains college-educated adults. It appears to me that there is a disconnect between those who care about local quality of place and understand its connection to economic development versus the Indiana Chamber of Commerce, which is championing the elimination of business personal property taxes and doesn’t understand that cities can’t be economic engines if local government and schools suffer.”

How about a bi-partisan approach that says perhaps our largest, most-profitable corporations need to pay their fair share to help Indiana provide key services and quality of life that make us attractive over the long haul? Twenty years of unabated cuts to various corporate taxes for the most profitable among us haven’t done anything but ensure that our per-capita income has dropped from 30th in the country to an anemic 40th by 2010. That’s the wrong direction. It’s time to stop digging the hole deeper.•

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Friedman is a LaPorte attorney who has represented numerous local governmental entities during his 30 years in practice. He’s also former legal counsel for the Indiana Democratic Party. Send comments on this column to ibjedit@ibj.com.


 

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