Local legislators look at Indiana business taxes

WEST LAFAYETTE, Ind. (WLFI) – Indiana legislators are debating two bills in the General Assembly after Gov. Mike Pence first called for elimination of the business personal property tax late last year. Neither bill proposes a phase-out of the tax, which was part of Gov. Pence’s initial proposal.

The bills are titled Senate Bill 1 and House Bill 1001. Each bill handles the personal property tax issue differently.

The tax is levied against business equipment and brings in about $1 billion annually. So, when the governor called for legislators to phase it out over time, as Michigan has promised to do with its version of the tax by 2024, local elected officials from around Indiana balked at the idea.

“The estimates are that if they were completely eliminated, about two-thirds of that billion dollars would be lost revenue for local governments,” said Larry DeBoer, professor of agricultural economics at Purdue University, who has looked at this issue for 20 years.

Taxing entities in Tippecanoe County will see a more of a hit than many other counties in the state, according to Tippecanoe County Commissioner Tom Murtaugh.

“The hit is going to be fairly significant for Tippecanoe County because we have a fairly large manufacturing base,” Murtaugh said.

A full phase-out scared many local officials, causing them to send warnings to constituents about what would happen if the tax were eliminated.

“You’re talking about losing trash service. You’re talking about maybe closing parks. You have to lay off policemen [and] firemen,” said Mayor Roswarski, who added the tax contributes more than $4 million annually to Lafayette’s budget.

Since eliminating the tax proved to be so unpopular with local government officials, state legislators are working on two bills to handle the tax differently.

As things stand in Indianapolis—and the situation changes by the week—Senate Bill 1 and House Bill 1001 have won favor with some state legislators and even some local officials as well.

The Senate bill proposes eliminating the tax for business with less than $25,000 in equipment. According to DeBoer’s research, that’s a large majority of Indiana businesses, more than 155,000. But it accounts for relatively little of the taxed amount, $54 million out of the $1 billion annual total.

“The top one-hundred personal property tax payers – you’re talking Lilly and Cummins and Chrysler and BP and those – pay about a third of the total amount in the state,” said DeBoer.

After even more pressure from the Indiana Association of Cities and Towns, Gov. Pence promised to push for additional revenue that would replace the $54 million localities it would lose if the senate bill passes.

The House version would give counties the ability to opt-out of the tax. This could leave the state with counties that tax business equipment, and counties that do not, potentially increasing competition for businesses to start or relocate in the state.

“To pit counties against each other, I’m not sure that’s a good idea,” said Mayor Roswarski.

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