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End punitive business personal property tax

January 4, 2014
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IBJ Letters To The Editor

Gov. Pence is right when he says “The time has come to phase out the business personal property tax” to “spur new investment and growth.”

A good step toward fulfilling the governor’s goal is to exempt production machinery and equipment from the personal property tax. Indiana’s economy is the most manufacturing-dependent in the nation, yet our state penalizes investments in production machinery and equipment by taxing those investments. It’s the old adage, if you want less of something, tax it.

Hoosier manufacturing is experiencing a revival, and it is critically important we keep the momentum. Indiana has added 60,000 manufacturing jobs since July 2009, second-highest in the U.S. behind Michigan, a state that is phasing out its personal property tax.

Much of the recent growth in manufacturing can be attributed to our state’s favorable tax and regulatory climate. Yet, despite the advantageous business environment in Indiana, property tax policy remains an important issue for manufacturers.

The 2013 Indiana Manufacturing Survey conducted by Katz Sapper & Miller and Indiana University Kelley School of Business ranked property and corporate tax policy as the issues “most critical in terms of the cost and viability of manufacturing in Indiana.”

This continued interest in property tax policy among Hoosier manufacturers is well-founded. The non-partisan Legislative Services Agency found that while net taxes across all property types decreased 10.3 percent from 2007 to 2011, business real and personal property taxes increased 6.3 percent.

In Indiana, the share of property taxes collected from residential property is only 29 percent and a whopping 71 percent from commercial and industrial property—an astonishingly lopsided property tax burden on Hoosier businesses.

In 2013, industrial and agricultural taxpayers paid $486.7 million in personal property taxes, which represents 7.76 percent of all real and personal property taxes paid to local governments. Any budget shortfall that may result from exempting production machinery and equipment can be recouped through local government efficiencies and consolidations, and if necessary, the current local option income tax system.

If we want to spur business investment, help farmers, improve the economic competitiveness of our communities, and attract new manufacturers without significantly impairing the budgets of local governments, support Pence’s plan and start with exempting production machinery and equipment from the personal property tax.

Pat Kiely, president
Indiana Manufacturers Association
 

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