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House, Senate OK corporate tax plans despite protests

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The House and Senate approved bills Thursday to reduce the business property tax just hours after local government officials from across the state joined to protest the legislation.

Representatives from Indiana counties, police, fire chiefs, schools and local government officials said they are against the bills – which would partially eliminate the business personal property tax – because the proposals don’t directly provide additional revenue to supplement the funds that would be lost.

“I think we all see this as the most significant piece of revenue loss coming down the road that local governments have ever seen in the state of Indiana,” IATC President Matt Greller said.

Republican Gov. Mike Pence has proposed phasing out the tax, which is levied on business equipment and supplies, and generates about $1 billion for local governments each year. But he’s also endorsed the House and Senate bills, which reduce – but don’t eliminate – the tax.

Under House Bill 1001 – passed 63-33 Thursday – counties would have the authority to decide if new businesses have to pay the tax on new equipment they purchase.

“This is a jobs bill,” said the bill’s author, Rep. Eric Turner, R-Cicero. “This is a bill that would create economic growth in our state.”

Senate Bill 1 – approved 35-11 Thursday – would lower the corporate income tax rate from 6.5 percent to 4.9 percent and eliminate the personal property tax for businesses that own less than $25,000 in business equipment and office supplies.

“This bill will help attract investment, support wage growth and help our state’s marketing effort,” Sen. Brandt Hershman, R-Buck Creek,

Although neither of the bills moving in the General Assembly would hit local governments as hard as the governor’s plan, leaders in both chambers have said the proposals could eventually lead to complete phase-out of the tax.

That’s what led local officials to launch the “Replace Don’t Erase” initiative, which they announced Thursday.

Greller said the effort was actually born in Michigan, where lawmakers have also proposed phasing out the business personal property tax over 10 years. But, Greller said, the Michigan General Assembly has made provisions to fully replace the revenue that local governments could lose.

“Eliminating the personal property tax may be the right thing for the state of Indiana. OK, we understand that,” Greller said. “What is more important is that we replace that revenue at the local level.”

Pence has said he doesn’t want to harm local governments, and that phasing out the personal property tax would attract businesses to Indiana and spur growth at existing businesses. Eventually, he’s said, the growth from those additional businesses and the jobs they create would help replace lost revenue.

But, local government officials say lawmakers should think about more than just helping businesses.

“We fear a focus on this kind of old school economic development is a race to the bottom, not a race to excellence,” said Angola Mayor Richard Hickman, president of the Indiana Association of Cities and Towns. ”When companies choose a community, deteriorating parks, failing infrastructure, deferred maintenance on buildings and sidewalks all speak to the quality of life and what they and their employees can expect in a city or town.”

Hendricks County Commissioner Larry Hesson said the state could impose an income tax to supplement the lost revenue. But, he said doing so could become an additional burden to citizens in counties heavily dependent on the business personal property tax for local funds.

“I’m not anxious to ask our citizens to pay more out of their pocket to give business tax payers a break, which is really what it is,” Hesson said. “There’s no information that’s available at this time that would tell us that doing so…would have any great impact on the attraction of businesses to this state.”

Law enforcement officials said eliminating the tax could create longer response times to emergencies and would force them to work with outdated equipment.

“We are seriously concerned, with my fellow police chiefs that I’ve talked about, about whether we’re going to be able to maintain the standard of public safety that our citizens have grown to expect and deserve from all of us,” Syracuse Police Chief Tony Cirillo said.

And, Indiana school organizations said they are concerned about losing funds for building maintenance, technology and school safety plans.

Greller said although both the House and Senate plans only partially eliminate the business personal property tax, they are the “first step in a long road” to fully eliminating it.

Despite the concerns local governments are raising, Pence sent a letter to mayors across the state Wednesday encouraging them to support the plan to phase out the tax.

“First, as we work toward phasing out the business personal property tax, I have committed to doing so in a way that does not unduly burden local governments' ability to provide for the needs of their citizens,” Pence said in the letter.

“Second, I have advocated for local control and decision making for adoption of any permanent phase out of the business personal property tax. Third, I have said that we cannot phase out this tax in a way that shifts that tax burden to hard-working Hoosiers.”

Leaders of the General Assembly are also standing by their bills.

House Speaker Brian Bosma, R-Indianapolis, said the House has already done “a great deal of analysis” on methods to replace lost revenue.

“If they choose to exercise this local options, we already have replacement income vehicles that would more than replace the anticipated impact of this,” Bosma said. “This is just an additional tool for local units of government. It’s one that I think is badly needed, and I don’t think it’s going to harm them.”

And Senate President Pro-Tem David Long, R-Fort Wayne, said “the most important thing in my eyes right now is to not handicap local government.

“There is a line between trying to tighten the reins a little bit on local spending and arming their ability to provide services,” he said. “That is a line we can cross if everyone’s aware of that and searching for a solution.”

But Sen. John Broden, D-South Bend, Sen. Karen Tallian, D-Portage, and Tim Skinner, D-Terre Haute echoed concerns they voiced earlier this week about the bill’s lack of reimbursement provisions. They each introduced amendments to add these provisions, but none were adopted.

In the House, Turner called his legislation “a jobs bill.”

But, House Democrats disagreed.

“This is one of the most important measures in front of this body and one of the most dangerous measures,” Rep. Ed Delaney, D-Indianapolis, said. “I guarantee you job losses under this bill. We’re making a big mistake if we go down this road.”

House Democrats echoed Senate Democrats' and local governments' concerns about creating an additional burden for citizens.

“What this does, if you pass this bill, is a tax increase on homeowners,” Rep. Greg Porter, D-Indianapolis, said. “Plain and simple, House Bill 1001 is not a good piece of legislation.”

Even though local governments don’t favor either bill, Greller said SB 1 is a “more thoughtful approach” to phasing out the tax.

“With a gun to my head, I’d prefer Senate Bill 1,” he said.

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  • Impact of Tax Cut Unclear
    Some great points being made. I too believe the legislators need an Economics 101 class. Two unrelated points: (1) there is no guarantee that the tax cut will directly impact Indiana since a company's suppliers and corporate HQs might be in other states who get more of the benefits and (2) perhaps this tax cut is a ruse to indirectly reduce local government per the Kearns/Shepard report by financially strangling local government.
  • Revenue to Local Government Has Increased Since the Property Tax Caps
    Local governments are not lacking in taxes because of the property tax caps. In fact, local government tax revenue has increased, not decreased since the caps were enacted. The problem is that they create more and more TIF districts and hand out corporate giveaways that drain the property tax revenue.
  • Flat Tax is peaked out
    Indiana's Flat Tax is maxed out. As they keep cutting taxes to rich special interests, they are just going to tack on extra taxes for the rest of us. Unless they increase individual tax rates for higher incomes they are not going to be able to replace the revenues. Us regular people just don't have the money. And the whole "county by county" decision making is simply going to cause the country with the greatest need for the revenue to lose out on new business. It will absolutely kill any county that is not already rolling in money.
  • Fighting the Tide
    Hey, it’s Indiana being Indiana. This state has fought EVERY political, social and economic trend since the day of its inception. The current trend being fought is the metro-centricity of the nation’s AND our state’s economy. All this really does is make Indiana look attractive at the state level while creating a larger tax burden at the local (city) level. It also has the effect of making larger communities such as Indianapolis specifically and other urban areas in general less attractive for investment. This in turn lessens out of state interests and shrinks the pool for potential investment favoring unincorporated, rural areas. The argument would be fewer rules, less environmental oversight and of course, much lower taxes. All so we can get a few more CAFO’s in some misguided attempt to revive small-town Indiana.
  • Ask Your Boss
    Here's another thought...since everyone knows about this tax cut, what say everyone go to their next company meeting or have a chat with the boss and simply ask, "So...the company is going to save a bunch of money from this tax cut...might we get a bonus, or can we run a price special, or can we get that old piece of equipment fixed / replaced?" Go ahead...ask!
  • I have great faith...
    Business Owner: You wrote, "I have a Master's degree, many years of business ownership experience, and lived through the Reagan years, so I'm as competent as the next guy ..." I'm confident your degree and experience and entrepreneurial savvy will guide you on a better use for the savings than rolling it out to your AGI and taking that hit. As for my affiliation, sorry to disappoint, but no, I'm none of those things. The business owners and franchise operators I talk to (including the one I have to deal with in the mirror every morning) all say the same things I've shared. When asked, "What if this or that tax or administrative line item were dropped from your budget, from your pricing formulas, from your P&L, what would you do differently?" I consistently get various combinations of responses with regard to payroll, benefits, or price adjustments (even if it means they can hold prices back from rising). Some have said they'd bump the match to 401K's. Not a one has said "I'd skim it off the books and buy a yacht!"
    • Property Tax Hit
      Local governments are already lacking funds due to the so-called 1% property tax cap, and the idea of rescinding that has been floated. Much property in Wash. Twnp. was grossly over assessed, and they are 5 - 6 years behind on hearing prior appeals. Low wages, incarceration for pot possession, abortion, and so-called gay marriage issue, are all indicators of what a backward state IN is. As other states move forward on social issues, IN steps back. Embarrassing; this from an R. I'll vote D in local elections. The local Rs don't care what their constituents want. They are narrow-minded and incapable of evolving.
      • Not Fair
        The reduction of business personal property tax and corporate income taxes means that local government now needs to find out another way to recoup Hundreds of thousands in some cases and Millions of dollars in other cases. With no plan on how local government will recoup these lost revenue sources, the hard working Hoosiers of this state will suffer. Jobs will not be gained. I do not own my own businesses, but do work closely with cities, towns and counties. Almost every Mayor that I meet with is worried about how they will overcome the losses from this decision. Ultimately that means that cities will have to charge more for city services and give less to local programs. Govenor Pence and Eric Turner suffer from rectal cranial inversion (Head up Ass syndrome). I'm not saying that all business will not use the benefits of this Bill to good use, but most will not. Most will help themselves!
      • MrGadget is no businessman
        MrGadget, you're obviously connected to the Governor's office, State Legislature, state GOP, the Chamber of Commerce or some other entity pushing for this tax cut. You write in the third person about what businesses would do, never do you say we, I or us. One of my businesses is very capital intensive so I have a sizable personal property tax (PPT) bill. If you reduce my PPT bill, then I just get the opportunity to pay some other personal tax utilizing after tax dollars. Since we all agree the State will have to offset this tax cut somehow, I would much rather pay a business levy with pre-tax money than pay a personal levy with after-tax dollars. I have a Master's degree, many years of business ownership experience,and lived through the Reagan years, so I'm as competent as the next guy to say trickle down economics does not work. Is this where we start the Laffer Curve debate?
        • The race to the bottom
          Wow, Indiana truly is trying to win the race to the bottom. Watch out West Virginia, Alabama and Mississippi, you've got competition!
        • The Gravity Of It All
          Trickle down does work, in fact it's the only thing that ever has. To Business Owner, your operations may not be property intensive, but many are. Restaurants have hundreds of thousands tied up in property...the tables, chairs, kitchen equipment, decorations, glassware, utensils...even the potted plants...it all counts, and that's thousands of dollars in annual taxes. If costs have gone up, and this tax cut amounts to an offset, then without that offset something would have to adjust to cover those increases, be it pay freezes, or price increases. To thy cynics that say "it just pads the bottom line" I call BS. If they don't respond in some favorable direction or other, their competition surely will, and they'll be punished for it. Let's not forget that "corp profits" are taxed at the highest rates...so if nothing else, the State gets it that way (and the Feds too). If it goes to shareholders...good. That's your 401K, don't forget (or if not yours, your parents', perhaps). The article says $1B is collected, and that's on top of what it costs to collect it, and what it costs business to deal with it. That money is going to end up someplace...not in a mattress. It will get spent, and contrary the unfounded claims that "most firms aren't locally owned", it will mostly feed the local economy in some form or fashion.
        • This is what'll happen:
          As proven pretty much everywhere over the past decade, this is what will happen. While it may help small businesses, the tax is not going to amount to enough to pay people more. Small businesses are just doing their best to hang on. Tax cuts do not create jobs...demand for products and services do. Come on, that stuff is taught in high school economics. Businesses that get all these tax cuts and breaks that aren't performance-related simply pocket the money or use it to pay dividends to shareholders. I love how the GOP comes up with these hair-brained ideas but has ZERO idea on how the money is to be replaced except with their usual hocus-pocus "trickle-down" nonsense. I'm all for capitalism. Hard work is what makes this country great. But cities and towns have schools to maintain, fire/police to pay for, infrastructure to maintain and expand. BASIC services. The state economy will collapse if property, sales, and personal income taxes are raised to replace it. If you tax the people to death that are supposed to be buying your products/services, there goes your demand, there goes your jobs. The entire GOP needs to re-take Economics 101. Seriously.
        • It won't work
          As the owner of two operating businesses, I will honestly say this tax cut will not result in lower prices or higher wages. The Personal Property tax is not an excessive tax, however the reporting requirements are extremely time/labor intensive and border on egregious. If you want to reduce business costs, restructure the tax reporting requirements; this would lower our costs while maintaining local revenues. It takes a certain amount of revenue for the State to provide what most feel is an acceptable services level. Indiana generally provides an acceptable level of services - although there are many deficiencies that need to be addressed - and personally I don't feel the State's tax burden is excessive. I'm quite qualified to say that when making location or startup decisions, businesses balance tax burden against provided services. No business is going to locate in a locale with a low tax burden, but not enough money to maintain roads. The Governor has neither the business nor executive experience to understand the true effects of these incremental tax decreases. Reducing any major expense does not directly translate to higher wages or new employees. The savings means I MAY be able to give a bonus this year, but usually that savings offsets other cost increases. This tax reduction is misguided, unnecessary and will needlessly strangle local governments.
        • Indiana sells itself short once again..
          If all we care about are low paying warehouse jobs, this is the way to go. But if we want to attract high paying skilled jobs, we have to improve our QUALITY of life and national REPUTATION. Which result does this bill promote?
        • Who really pays the current business taxes?
          This bill substitutes a known guaranteed income source for pie in the sky. It is true that businesses only collect taxes, but they do so from their NATIONAL sales market. As a contra-argument, does the recently increased hotel and car rental tax decrease convention demand? The primary argument was that these taxes would be paid by visitors from out of state. Reducing business taxes does the opposite.
        • Sad
          I weep everytime I read about out pathetic legislature. Its easy for out spineless legislators to cut taxes, when its the local politicians will have to be the ones that have to raise taxes on individual taxpayers.
        • Tinkle down economics
          All very true except businesses don't raise wages or hire more workers with the tax savings. They just increase profits, which for most Indiana businesses, are headquartered elsewhere. And at the same time, you will argue that there is no reason to raise the minimum wage. Businesses are not really driven by taxes, they are driven by sales. Maybe we can reduce all taxes to zero and do nothing for anyone? Once again Indiana government represents the interests of business over those of its citizens.
        • Snow plowing
          Since the City of Indianapolis is already out of snow-clearance money this year, next week's snowstorm should not be cleared from the streets around the state capitol. And perhaps the City's low-budget snow-removal plan should designate the first two blocks of North Capitol and the 200 blocks of West Ohio and West Washington as "snow storage" zones. All the downtown plows could push downtown's snow there, except for a bus lane. IMPD could enforce a "no cars" ban in the area. (How many legislators would ride IndyGo to work?)
        • What?
          MrGadgetguy, if you think businesses are going to lower their prices and increase workers pay because this tax is lowered or eliminated you are wrong. This will just increase the bottom line of net profit for them and the stockholders.
        • Republican Assertions Lack Factual Basis
          Mr. Gadget - You infer a direct relationship between taxes, labor pay, and job creation. It is not that simple or predictable. At the macro-level, the federal government cut taxes under the Bush administration and saw no increase in job creation. The Republicans in the state legislature think that tax cuts automatically result in job creation. Unfortunately, economics is not that simple. And unfortunately, the Republicans are that simple and continue to espouse this erroneous cause/effect relationship despite an abundance of studies that show otherwise. Have you seen any job creation directly related to the income tax cut from last year?
        • Shifting Transparency Not Burden
          You folks are totally missing the reality here. Business has never paid these taxes...not one dime. They've only collected and remitted it. The money for business taxes isn't coming off a money printer in their back room...it comes from employees in the form of lower wages and benefits, and consumers in the prices paid for the goods and services produced. The only difference is transparency...in the current method of "business taxes" you don't see the tax because it's buried. By eliminating business taxes, any or all of them, prices come down some, and wages go up some. Workers with more pay spend more, and their dollars buy more, and that makes it attractive for business to build and expand here, which means more people working and spending, which INCREASES tax revenue on the consumption side and through income taxes WITHOUT raising those rates at all. If you don't believe me, Go Ask Your Boss! Additionally, eliminating business taxes also eliminates the COST of administering, collecting, enforcing, prosecuting, and record keeping of those taxes, thus reducing the cost of government on you fine folks, the individual taxpayer. Bottom line: business pays no taxes, consumers pay all. No amount of legislation will ever change that in a free market society. If you're going to be upset about this, you should be upset about the fleecing you've been enduring for decades, and the lost opportunities in jobs and economic growth you have suffered all along.
          • Depressing
            What is really depressing to me is that legislators in the majority party are quite willing to ignore what these bills do to individual taxpayers. It can't imagine any of these legislators getting strong support for these bills from their citizen constituency. Yet, they are more than comfortable with ignoring what most voters want -- or, in this case -- don't want.
          • Failed policy
            So local governments will need to raise taxes on homeowners and residents to pay for this tax giveaway to business. Or we have to believe in the Pence 'trickle down' theory of economics (business tax cuts will result in so much new economic growth that we'll offset the lost revenue with more tax revenue from income and sales taxes)- a long discredited theory for which there is no supporting evidence.
          • GOP is destroying the state
            The GOP dictatorship is destroying this State. November can't get here fast enough. It's time to throw these idiots out before Indiana becomes a third-world nation.
          • Tax the Poor
            Way to go Legislature. Reduce and eliminate taxes on wealthy businesses an make the working stiff pay the bills. Indiana is the land of millionaires and minimum wage workers.

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          1. I think the poster was being sarcastic and only posting or making fun of what is usually posted on here about anything being built in BR or d'town for that matter.

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