Indiana lawmakers pass package of business tax cuts

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The General Assembly has sent the governor a package of business tax cuts that supporters say will create jobs by luring more companies to the state.

Senate Bill 1 cuts the corporate income tax rate and lets local officials reduce or eliminate property taxes on business equipment.

But it doesn’t go as far as had been proposed by Gov. Mike Pence, who sought a complete phase-out of the personal property tax. Still, Pence said he pleased with the legislation and he’s expected to sign it into law.

“This is a strong bill that will allow Indiana to be the destination of choice for new investment in this state,” said Senate Tax Chairman Brandt Hershman, R-Buck Creek.

“We’ve seen tremendous success from our prior efforts in business tax reform,” he said. “This secures Indiana’s spot as not only a leader of the pack when it comes to our neighbors in the Midwest, but nationally, Indiana’s on the move.”

The Senate passed the bill 36-12 and the House approved it 63-37.

The bill extends the reduction of the corporate tax rate, which was already scheduled to drop to 6.5 percent in fiscal year 2016. The legislation will phase in an addition reduction, lowering it every year through 2022, when the rate reaches 4.9 percent.

The bill’s House sponsor, Rep. Eric Turner, R-Cicero, said the legislation – when fully implemented – will give Indiana the lowest corporate tax rate in the country. That assumes other states won’t act, something that Turner acknowledged is unlikely.

“Other states are not standing still,” Turner said.

Supporters said that’s why Indiana needed to act not only on the corporate tax but on the personal property tax as well. Pence has said repeatedly that it’s a disincentive for investment.

The state creates three options for local governments to use to reduce personal property taxes:

– Counties can exempt all personal property worth less than $20,000.

– Counties can completely eliminate taxes on all newly acquired business personal property.

– Local governments can offer extended abatements on a particular business’s new personal property for a period of up to 20 years.

Lawmakers have been working on the legislation for months – ever since Pence asked the General Assembly to find a way to eliminate the personal property tax.

But local officials cried foul, saying they couldn’t afford to lose the $1 billion the tax generates for cities, counties, townships, schools, libraries and other levels of government. Mayors called on lawmakers to replace revenue lost to the tax cuts, and school districts complained the cut would be another loss they couldn’t handle.

The compromise legislation is meant to give those local officials the option of reducing the tax – without mandating lost revenue.

But even in its revised from, the bill received heavy opposition from Democrats in both chambers.

“A strong business tax climate doesn’t help Hoosiers if those tax cuts don’t translate into jobs or more money in the pockets of Hoosier families,” Sen. Tim Lanane, D- Anderson, said in a press release after the debate. “We have to go beyond corporate giveaways and focus on building up all Hoosiers.”

And Sen. Greg Taylor, D-Indianapolis, said lawmakers who voted yes will have to explain to constituents “why you’re giving somebody a break and not getting anything in return.”

“I’m going to vote no on this bill because I don’t want to take money from our local community and give it to somebody who takes my money and makes money off of it,” Taylor said.

John Ketzenberger, president of the Indiana Fiscal Policy Institute, said the legislation will mean tough decisions for local officials, especially in counties dependent on manufacturing.

“Whether it’s good public policy remains to be seen,” Ketzenberger said. “But I’m a little worried about the nature of allowing local governments to adopt this when some counties depend so much on business personal property tax and some don’t.”

The legislation also provides a tax break for propane customers as well. Propane retailers would be permitted to receive credit in April for sales taxes collected on propane sold at less than $2.50 a gallon during the months of January, February, and March of 2014.

That’s a reaction to rising propane costs that have driven up heating bills for propane users.


  • Not Their Fault
    This nasty bill is not local governments' fault. Our county and city governments, as well as our schools, stand to lose by this bill, and they're right on the edge now. All this does is make Repub business owners richer at the expense of local government and schools, and that's BAD business. Repubs still can't do math!
  • Where's the Efficiiency?
    Where's the efficiency and fairness. Indiana will not have numerous government entities enacted different rules for business across the state. I suspect the smarter/more aggressive units of gov will even try to use the implementation as a marketing tool. If, as several business owners noted, the tax is not bad but the paperwork is onerous, why not try to streamline the reporting process rather than create the quagmire that lies ahead?
  • WHY?
    As a fellow business owner, I agree with Jack's sentiment that the paperwork associated with this tax is worse than the tax payment. However, I would submit that John Ketzenberger's comment about local governments being in a tough spot meant that those communities that can not afford to waive the property tax may be painted as anti-business.
  • Foot Shooting
    Jack, The tax changes may or may not be good policy. However, local units of government shoot themselves in the foot with some regularity.
    • Let Local Government Govern
      What's Ketzenberger's problem? He's worried that local government can't make good decisions for their communities? What an elitist mindset. It's quite doubtful that a local government body is going to shoot itself in the foot. As a small business owner I HATE this ridiculous personal property tax. It's not so much the money, it's having to try to complete the horrendous tax forms. Truly a pain in the ass!
      • So...
        Where's Bosma going to make up the revenues?

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      1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

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