Manufacturing group opposed to new bill
For the first time in Indiana, taxes on C corporations may be coming to a county near you. Senate Bill 176, which passed the Indiana Senate on Feb. 4, is a proposal to fund mass transit in six central Indiana counties by increasing local option income tax rates on individuals and by creating two new county taxes on corporations based upon income and employee count. Even though the proposal is limited to six counties and first requires approval by the county council and voters, the creation of two new county corporate taxes have statewide implications.
First, taxing corporations is bad economic policy. The corporate income tax is the most harmful tax to economic growth. The burden is paid by workers who earn lower wages, consumers who pay higher prices, and shareholders who receive less income from their investments.
Second, the legislation opens a “Pandora’s Box” of new county corporate taxes to fund local government spending that will eventually find its way to all 92 counties.
Third, the oft-repeated line that the “business community” supports mass transit; thus, corporations should have “some skin in the game,” is a gross generalization. A review of the supporters of mass transit on the Indy Connect Now webpage shows only one manufacturer alongside several not-for-profits and tax-exempt organizations. Additionally, we have not had one member ask us to support mass transit. Rather, since the latest proposal was introduced, opposition from our membership to the tax provisions in the bill has been clear.
Fourth, the tax administration in the proposal is complex, confusing, and contradictory. For example, under current law, a corporation that has business income from both within and outside Indiana must apportion its income to the State by means of a single-factor sales formula. However, under the mass transit tax proposal, the amount of a corporation’s income subject to taxation by the county is based upon a three-factor apportionment formula (payroll, sales, and property assessed value).