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Some worry about eliminating Indiana business tax

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Many local government leaders are worried that a proposal to eliminate Indiana's property tax on business equipment and machinery would cause another big cut in revenue for their operations.

The plan backed by Republican Gov. Mike Pence would end a tax that puts about $1 billion per year into local coffers. Many communities are still struggling with their budgets five years after the enactment of statewide property tax caps.

Some leading GOP lawmakers have also endorsed the proposal, which could be debated during the legislative session that begins in early January.

Local governments would need replacement sources of tax revenue or face cutting "vital public safety services and other things that residents absolutely need and expect," said Matt Greller, executive director of the Indiana Association of Cities and Towns.

"Every mayor that I have spoken with is deeply concerned about what the elimination of the personal property tax might mean to local government, to their cities," Geller told the Tribune-Star.

Statewide, business personal property tax collections for 2012 totaled $1.04 billion, with that money going to entities such as cities, counties, schools and library districts, The Times of Munster reported.

Some counties with numerous factories have high levels of property tax revenue coming from the business tax, such as more than 40 percent in southwestern Indiana's Gibson County and 26 percent in western Indiana's Vigo County. Largely rural Brown County in southern Indiana, however, has a level of about 3 percent.

Pence said he wanted to phase out the tax in a way that "does not unduly harm our local governments' abilities to meet their obligations." He gave no details about how that would work when he named it last week as the top priority of his 2014 legislative agenda.

House Speaker Brian Bosma, R-Indianapolis, said local governments might be allowed to decide whether to give up the business personal property tax in order to help those communities attract more business investment.

Local government units across the state have seen big drops in property tax collections since legislators approved statewide caps in 2008. Those limit annual property taxes to 1 percent of the assessed value for homes; 2 percent for rental property and farmland; and 3 percent for business property.

Supporters of eliminating the business equipment tax say few states tax the property of businesses as much or more than Indiana.

"It remains the one area in our tax climate where we stand out like a sore thumb," said Kevin Brinegar, president of the Indiana Chamber of Commerce.

Elimination of the tax would increase property taxes for other taxpayers, according to Larry DeBoer, a Purdue University economist. He estimates that without the business equipment tax, other property owners would pay about $453 million in higher taxes and local governments would lose $510 million.

House Minority Leader Scott Pelath, D-Michigan City, said he suspected eliminating the equipment tax would simply shift the tax burden onto homeowners and other residents.

"Consistently cutting taxes for those with all the power and all the money is not doing anything for middle-class pocketbooks," Pelath said. "This trend toward more corporate giveaways is going to end up hurting families who will not find much protection from the property tax caps."
 

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  • Giving the Cow Away
    What happens when the next state offers these businesses lower taxes? They move there and then we have no jobs and no tax revenue. We need to improve our workforce skills and quality of life so that businesses locate here because we have top talent and desirable communities. As too many girlfriends told me, "If I give you the milk for free you'll never buy the cow." Too many of the businesses this will attract are just chasing free milk.
  • I wish we could elect the Chamber, as they get to run the state.
    I wish we could elect the Chamber as it seems they get to run the state...even having a seat on education...No seats for the middle class and workers. It is sad when a single lobby group has too much power. Or rather sad that our elected official do everything the Chamber says.
  • Okay
    Ignore macroeconomics and decades of evidence. I've actually backed my assertions up (as far as one can without posting links) and you're still posting fairy tales that THIS time a tax cut will create jobs. Not much else to say. Have a great week.
  • Hoarders
    How many of those top hoarders are in California? Have you seen the tax policy there? OMG I'd hoard overseas too. You're projecting the national tax policy problem onto Indiana (the subject of the article) as if it scales and fits perfectly, but of course it doesn't. Sales revenue earned overseas stays overseas for good reason, but that's a whole 'nother thing entirely. This article is about local businesses and the machinery and equipment that is physically in Indiana. It's not about corporate income taxes, federal taxes, medical device taxes (visit Warsaw, IN, body parts capital of the world...or something like that), cigarette taxes, twinkie taxes or whatever. Factories, assembly lines, and hair dressers pay a penalty every year for having the tools and machines and equipment that makes it possible to put people to work. It's really time to stop punishing the job makers for trying to do what they do. It's like begging them to hire with the right hand while slapping them with the left hand for their trouble.
  • Perhaps
    You missed the budget shortfall article on this very site? The rest of your post is just fuzzy math based on what companies should do, not what they've actually been doing. Again, use the Google.
  • And
    It's been breaking records since at least 2007, so the ACA talking point doesn't wash.
  • Biz Can Choose
    @ "Me": Sure, business can choose, and rightly so. What you call "banking" I call investing, whether in their own growth or elsewhere. Lowering taxes has repeatedly resulted in higher tax revenues, not just occasionally, but every single time. Remember we're only talking about tax on machinery and such, not land at all. The whiney mayors are making their drama cries without stating the underlying implication that zero economic benefit will come from letting business do something constructive with $1B...they'd rather not trim their fat and waste. Indiana posted $15.7B in total tax revenues last year. This $1B cut represents 6.4% of that. Raise your hand if you think there isn't at least that much waste in state government today.
  • In fact
    Forbes has a helpful slideshow of the top 10 cash hoarders, the amounts they're hoarding and what percentage of the stash is overseas (meaning NOT invested here in any way). Very useful.
  • Mr. Gadget
    Please, Google "corporations sit on cash." It's only made financial news headlines for several years now because the amounts are breaking records. Please.
  • Sitting On Cash?
    @ Jim F.: Sitting on it where? In a mattress? Doubtful. It's invested somewhere and those investments create opportunities, jobs, economic activity of some sort somewhere. The ACA has driven many to stockpile cash out of uncertainty. Until they know what their suppliers and contractors will do with regard to prices on the materials / components / services they depend on, they feel the need to build up a liquid reserve in hopes of absorbing those increases until they can react with employment, wages, benefits, and contract renewals with customers. That 25K jobs was not so much theoretical, rather an arbitrary example. I could have said 12.5K jobs at $80K each. One can divide $1B any way one likes.
  • Cutting taxes to create jobs
    Has never worked nationally, why would it work locally? Many corporations now pay an effective rate of 0. Mr Gadget seems to forget that these corporations are not forced to turn tax savings into employee salaries. He can do all the theoretical hiring math he wants, but if companies choose to bank that money or (more likely) give their management healthy bonuses, then his numbers never materialize. The proof has been all around us for years.
    • Theory vs Reality
      Mr. Gadget - US business are already sitting on $2 trillion in cash. You argument that 24K jobs will be created is highly theoretical. The state is still waiting for all those new jobs to kick in from the "right to work" legislation and last year's tax cut. You have been drinking too much chamber of commerce kool aid.
    • Will Create Jobs
      If business doesn't have to pay $1B in taxes annually (per the article) how many jobs is that in wages? How many expansions become possible? How many new businesses can be created with that $1B? You forget that more people working and/or higher wages means MORE tax revenue for the communities at the end of the month from income taxes, sales taxes, etc. AND less payout in welfare / unemployment. Every unemployed worker COSTS the State (or community if you like) hundreds of dollars / month. At an average of $40K / year, $1B translates to 25K jobs and SAVES 15K per worker ($375K annually on 25K people) in unemployment benefits alone, not counting the administrative overhead for all those cases (which is not trivial money btw). Those 25K workers at $40K / year will spend nearly all of that income in the local communities on food, rent, utilities, and retail, paying consumption taxes on most of that, and income taxes as well. There's another $8K in taxes per worker...$200K total annually. So far, just from the hip, I've shown where 2/3 of that $1B in biz prop tax revenue comes into the government coffers via other paths. The rest comes indirectly, as 25K workers shopping and spending results in MORE hiring of personnel by the businesses that serve them to meet that demand, saving more on unemployment, collecting more in sales and income taxes, and on and on goes the snowball.
    • do not cut the equipment business tax
      why would we do this Property taxes will go up again for those of us who own homes, not multimillion dollar businesses. As with anything, business owners get depreciation on equipment, we do not get depreciation on our cars and homes. What is going on, favor business totally and forget the middle class and workers? You won't see jobs created by cutting this tax. Seems that businesses are now in control of government, pretty much a one sided affair. I thought this was a democracy where every vote counts, not votes that have more dollars and wealth than the rest of us. It seems that capitalism equals a more than equal vote in government affairs. That is why lobbying should be abolished, it allows special interests to have more say in government, essentially not democracy, more of an autocracy with the wealthy class ruling over the rest.
      • Eliminate All Business Taxes
        Business taxes are passed on to consumers in higher costs of goods and services, and passed on to employees in lower wages and benefits. Business can't print money. If the communities need revenue, bump the statewide sales tax a fraction of a point and call it done. And please don't go the way of California with hundreds of special sales tax rates. Just one rate, statewide, to replace all other taxes forever.
      • Stop Cutting Taxes
        There is no NEED to cut the taxes. Our surrounding states have lower taxes already. Pence is pandering and playing too much politics rather than addressing REAL problems. I am regretting my donation to his campaign.

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      1. Great article and post scripts by Mike L (Great addition to IBJ BTW). Bobby's stubborn as a mule, and doubt if he ever comes back to IU. But the love he would receive would be enormous. Hope he shows some time, but not counting on it.

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      4. Jim, your "misleading" numbers comment is spot on. This is the spin these posers are putting on it. News flash, fans: these guys lie. They are not publicly traded so no one holds them accountable for anything they say. The TV numbers are so miniscule to begin with any "increase" produces double digit "growth" numbers. It's ridiculous to think that anything these guys have done has awakened the marketplace. What have they done? Consolidate the season so they run more races on consecutive weekends? And this creates "momentum." Is that the same momentum you enjoy when you don't race between August and March? Keep in mind that you are running teams who barely make ends meet ragged over the summer to accomplish this brilliant strategy of avoiding the NFL while you run your season finale at midnight on the East Coast. But I should not obfuscate my own point: any "ratings increase" is exactly what Jim points to - the increased availability of NBC Sports in households. Look fans, I love the sport to but these posers are running it off a cliff. Miles wants to declare victory and then run for Mayor. I could go on and on but bottom line for God's sake don't believe a word they say. Note to Anthony - try doing just a little research instead of reporting what these pretenders say and then offering an "opinion" no more informed than the average fan.

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