Business Property Tax Proposals Pass House, Senate

Posted On January 31, 2014

By Mike Perleberg

(Indianapolis, Ind.) – As Indiana’s House and Senate each passed the proposal Thursday, the state’s leading local government association cautioned lawmakers about the plan to eliminate the personal property tax on businesses.

Governor Mike Pence has said his proposal to eliminate the personal property tax on business equipment is tax reform, not a tax cut. In his January 14 State of the State address, he has asked lawmakers to find a responsible way to phase out the tax.

The personal property tax is a significant source of revenue for local governments such as counties, cities, schools, libraries, and others. It provides $1 billion each year to those entities.

The House and Senate each passed different versions of the proposal on relatively easy votes. The Senate voted 35-11 on Senate Bill 1, which seeks to eliminate the tax for smaller businesses with less than $25,000 of equipment, or about 68 percent of current Indiana business property tax filers. SB 1 also seeks to cut Indiana’s corporate income tax from 6.5 percent in 2015 to 4.9 percent in 2019.

“Many economists report the corporate income tax is the most harmful tax to economic growth,” said SB 1 co-author Brandt Hershman (R-Buck Creek). “Additionally, the business personal property tax is a direct obstacle for companies looking to expand their operations and invest in new technologies. The changes I’m proposing will lead more employers to take a close look at Indiana when making location decisions, bringing our state to a new level of economic competitiveness.”

The House voted 63-33 to advance its bill. That version creates an option for county councils to eliminate the tax on new equipment purchased by businesses.

As the bills neared passage Thursday, the Indiana Association of Cities and Towns held a press conference in which executive director and CEO Matt Greller announced the formation of the assocaition’s “Replace, Don’t Erase” campaign. Greller said cutting that tax could hurt local government entities’ abilities to provide services, infrastructure and improvements.

The IACT is urging lawmakers to understand that any personal property tax revenue eliminated must be made up elsewhere. The House and Senate bills as they are written now do not include plans for replacement revenue, Greller said.

The reduced revenue stream would be on top of lower revenues for locals due to property tax caps approved in 2011.


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