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Business tax cuts take next step at Statehouse

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Gov. Mike Pence announced his support Tuesday for a bill that would cut two Indiana taxes.

Senate Bill 1, which would reduce the corporate income tax and eliminate the business personal property tax for small businesses, passed out of the Senate Tax and Fiscal Policy committee 7-2.

Pence asked the General Assembly to pass legislation that would phase out the business personal property tax during his State of the State address last week. Both the House and Senate have proposed plans to eliminate the tax.

Office of Management and Budget Director Chris Atkins, who spoke on behalf of Pence at the committee meeting, said the governor thinks the Senate plan addresses issues the state needs to resolve in order to remain economically competitive.

“While we’ve made substantial progress on our tax climate in recent years, the governor believes we need to continue to make progress on two important features of our tax system that are addressed in this bill,” Atkins said. “And those are the corporate tax and the business personal property tax.”

SB 1 would reduce the state corporate income tax rate from 6.5 percent to 4.9 percent by 2019. Sen. Brandt Hershman, R-Buck Creek, who authored the bill, said that would reduce state revenue by $130 million a year.

Additionally, businesses with less than $25,000 in personal property would no longer be required to pay the personal property tax. Hershman said this would cost the state $25 million a year.

But Hershman said that’s less than 1 percent of the state’s total annual revenue.

“Our overall goal is job creation. Our overall goal is to be economically competitive,” Hershman said. “And at the end of the day, the way to do that is by looking at what it costs to run a business in the state of Indiana.”

The bill also creates a Blue Ribbon Commission to study the effect phasing out the business personal property tax would have on the state’s economy over time.

Hershman said he thinks the business personal property tax is “disproportionally paid by a relatively small group of large taxpayers.

“I think a legitimate question can be raised is whether ultimately that’s the kind of tax policy we want in the state,” Hershman said.

In order to supplement part of the revenue lost by reducing the corporate income tax, Hershman proposed reducing the Research and Development tax credit by 50 percent and eliminating the College Contribution tax credit. That would add just under $25 million to the state’s economy.

And while most Indiana businesses said they support SB 1, some told the committee they are concerned about the effect removing the Research and Development tax credit would have on their operations.

“Operating in this arena makes us heavily dependent on our R&D efforts,” said Gretchen Gutman, vice president of public policy for Cook Medical Device Company. “Cook has relied on Indiana’s credit to help fund these efforts.”

Jeff Linder, associate vice president for public affairs and government relations for Indiana University, said he is concerned about the possible negative impact eliminating the College Contribution tax credit could have on donations to state universities.

“We certainly don’t oppose trying to help business and make Indiana a better business climate,” Linder said. “But this does cost public and private universities in the state a significant amount of money.”

Linder estimated that universities would lose roughly $17.5 million if the credit were eliminated.

Representatives from several Indiana counties and cities raised additional concerns about a “slippery slope” of continuing to reduce the business personal property tax without generating the lost revenue from another source.

“Prior to session, our policy board…took a position that all reduction of personal property should be replaced somehow, some way at the state level,” said David Botorff, executive director of the Association of Indiana Counties.

New Haven Mayor Terry McDonald, a Republican, said eliminating the tax without finding ways to replace the revenue would cost his city $800,000 annually.

Sen. Karen Tallian, D-Portage, said she had similar concerns about reducing the corporate income tax because she thinks it would take money away from state agencies.

“We can’t keep doing this, and I don’t like the, ‘Let’s cut it now and study it later’ attitude,” Tallian said.

An amendment to SB 1 would require small businesses to file an annual certification with the county assessor verifying their exemption from the personal property tax. A second amendment would fine businesses $50 for failing to file the certification.

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  • Inventory tax
    Several years ago, the General Assembly passed a law eliminating the inventory tax on businesses. This resulted in a lot of lost revenue. The decision was made to recoup that revenue by raising homeowner's personal property tax. Mine, for example, was initially increased by 139%. The outcry by common citizens was clear. Citizens did not want to bear the responsibility of paying for what businesses no longer paid for. The Tea Party took the lead in forcing the General Assembly to minimize the effect its action was going to have on rising property taxes. Tea Party leadership led to the eventual maximum a property owner would pay in taxes. The Tea Party was responding to government overreach. That, in my opinion, is happening again right now. The government is supporting a minority interest without concern for the majority. Once common citizens realize what this tax elimination will mean to them -- an increase in their taxes -- we will see how this plays out. I hope it is as ugly for this General Assembly and Governor as the elimination of the inventory tax was to previous elected officials who stopped representing their constituents.
  • And the WORKING poor
    And they rejected the minimum wage increase, shafting the WORKING poor Hoosiers even more.
  • Well Said DRT
    I also am sick of socialist democrats crying over a a business making 'profits'. This country was built on companies making profits. Its hilarious to listen to a lib badmouth our healthcare or the fact that drug companies make a profit, all while ignoring the technological and medicinal advances that have been made over the years because of the profit incentive. Imagine if whatever company you worked for had zero motivation or incentive for profit, they wouldn't innovate, they wouldn't grow, they wouldn't hire, and eventually they wouldn't produce. I'll never understand how its "greedy" to want to increase profits, yet its somehow "not greedy" to be worthless, unproductive deadweight and yet demand that others give you a greater share of the money they earned.
  • Get Serious LIBS
    Hey Italiano, maybe lowering taxes on a small business owner will allow them to hire more little guys....your progressive logic is a disease corrupting minds. Liberals are insane. By the way, trickle down economics...it won't make you rich, but it will provide a whole lot more than simply taking from job providers and splashing the poor with little extra gov benefits. There has never been a STRONG and PROSPERING country that was the result of continued increase in taxes. If you want to help the poor and middle class, encourage growth in jobs. If you want to hinder job growth and hurt middle class, raise taxes on small businesses.
  • Just be patient
    One of these days trickle down economics will start working. It's only been 30 years, the rich need to hoard some more wealth and then we'll be drowning in all the jobs they create.
  • Nice...
    So "small" businesses get an un-needed tax cut at the expense of families saving for college and R&D credits. Is it worth it? Probably not.
  • Profit = Good
    Profit is the reason you have the internet. It is the reason you have a computer or other device. it is the reason the IBJ exists. So without profit you wouldn't have a forum or ability to express your views to the world on why you hate profit. But the real question is why so many socialists read a business publication in the first place. I would think the Daily Worker would be more up your alley.
    • The rich take care of themselves
      Ever since they bought the State government, they have been able to pass whatever they want to protect their profits. Every year the costs have been shifted to those who can least afford them, and this is no exception. Indiana is the minimum wage state, with maximum taxation on the bottom. It's no wonder that Indiana is become the top crime state of the mid-west.
    • It's the new thing...
      It's interesting how complaints about inequality change when addressing that inequality is no longer beneficial to them. How exactly is taxing investments business make in equipment fair? They make the investment in order to produce revenue, which will be taxed too. If it's good for small business, then shouldn't it be good for everyone?
    • Tax the little guy
      And again our (well not mine) governor moves to lower taxes on the rich while taxing the poor

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