Pharos-Tribune

Editorials

February 13, 2014

THEIR VIEW: Repealing business tax will hurt locals

The state of Indiana is in the bullying business.

In the current round of pushing around local governments, Gov. Mike Pence and some legislators are using the elimination of a tax on business equipment as their whipping branch.

It’s a tax that employers pay on the machines and property that makes them money, and it’s worth about $1 billion annually to fund local governments, schools and libraries.

If Pence gets his way, it will go away.

That would mean not only a significant loss in funding for services in Clark and Floyd counties, but $376 million in increased taxes for Hoosier property owners, according to a report published this week by the nonpartisan Indiana Fiscal Policy Institute.

The governor — who has promised to mitigate the local harm caused by his plan through alternate revenue streams — says repealing the tax will stimulate business growth.

The Fiscal Policy Institute’s report isn’t buying that.

The report found that eliminating the tax would have minimal effect on luring new jobs to the state, but it could pit Indiana communities against each other in attempts to attract business development. And Republican and Democratic mayors from around the state have voiced strong opposition to eliminating the tax.

The easy explanation for their resistance is the plan is a bad one, but the proposal is hardly a surprise. It’s a habit.

The report found that local governments are still grappling with property tax caps enacted in 2008. Those alone will cause $800 million in lost tax revenue next year — money that would have been used to pay for police, school buses and other public services. Eliminating the business tax would increases those losses by another $687 million.

The property tax caps were pushed by the state, and creative wording by officials on a election referendum helped the caps get amended into the state constitution by Hoosier voters.

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