Republicans in the Senate say they want to spur economic development by cutting two taxes on businesses—one that applies to corporate income and the other to equipment.
Under Senate Bill 1, small businesses that own less than $25,000 worth of business equipment would be exempt from paying what’s called personal property taxes. Additionally, the law would reduce the corporate income tax rate from the current 7.5 percent to 4.9 percent by July 1, 2019.
Already, the tax is scheduled to drop to 6.5 percent in about 18 months.
Cutting the corporate income tax rate would put $132 million back into the private sector, Republicans said.
Senate Tax Chairman Brandt Hershman and Senate Appropriations Chairman Luke Kenley said they authored the bill “to boost Hoosier job and economic growth.”
The announcement comes one day after House Republicans released a plan that would give counties more authority to eliminate the personal property tax locally. That plan would leave it up to the counties to decide whether or not businesses have to pay taxes on new equipment they purchase.
Gov. Mike Pence has proposed phasing out the personal property tax as a way to attract more business owners to Indiana. But Pence says he’ll leave it up to lawmakers to decide how to make up the revenue to local government and schools.
Long said the goal of the Senate plan is to “create a better environment to create jobs and to build businesses. ... We think this bill is the better approach.”
Hershman, who is the primary author of the bill, said an estimated 71 percent of Indiana small businesses would no longer have to pay business personal property taxes if the law were enacted. Indiana ranks among the best tax climates in the nation—except for its the corporate income tax, Hershman said.
“This effort will catapult Indiana into a leadership role nationally with respect to our tax rate,” Hershman said.
John Ketzenberger, president of the Indiana Fiscal Policy Institute, said that because the Senate’s property tax plan would require larger companies to keep paying, it would cost local governments less than the House proposal.
Ketzenberger said he thinks the Senate created a “clever attempt to give the governor what he wants” while also satisfying businesses.
Senate Minority Leader Tim Lanane, D-Anderson, said while he thinks the GOP plan would cost less than the governor’s initial idea, the state should look at giving tax cuts to individuals rather than businesses.
“Does everything have to be just for business?” Lanane said.
Ketzenberger said he thinks Lanane’s argument is worth considering.
SB 1 would also create a commission to examine the effect the personal property tax has on Indiana’s economic competitiveness. The commission would consist of representatives from the Indiana Manufacturers Association, chambers of commerce, cities, counties and the governor’s office.
If the bill becomes law, Long said Indiana would have the second best corporate income tax rate in the country.