Pharos-Tribune

State News

February 7, 2014

Pence reaffirms support for end to business tax

Indiana mayors demand replacement revenue.

(Continued)

Both Republican and Democratic mayors from around the state have voiced strong opposition to rolling back a critical revenue stream that funds local governments, schools, and libraries.

Neither the House bill nor the Senate bill totally eliminates the tax that manufacturers and other businesses pay on equipment. But Pence said again that his eventual goal is to match other Midwest states that have repealed similar taxes.

“This is just a bad tax in a state where you make things,” Pence said Thursday.

Last week, mayors from the state’s six largest cities met with Pence to press him for details on his often-repeated promise to mitigate the harm to local governments and other property owners.

They came away without answers.

“I don’t know any mayor who is saying, ‘Let’s get rid of this tax without replacing the revenue,” said Republican Mayor Duke Bennett of Terre Haute, who took part in the meeting.

Matt Greller, executive director of the Indiana Association of Cities and Towns, said local leaders are frustrated with the lack of detail.

“There is tremendous concern,” Greller said. “We have no understanding of what the Governor means when he says there will be no ‘undue harm.’ We don’t know if that means one dollar or a billion dollars.”

The report issued by the Indiana Fiscal Policy Institute explains the anxiety of local officials. It found that local units of governments are still grappling with property tax caps enacted in 2008. Those caps alone will reduce revenues by $800 million next year — money used to pay for police, school buses, and other public services.

If the business tax were eliminated, those losses would rise by another $687 million a year.

The report also notes that the property tax caps, now locked into the state constitution, limit the ability of lawmakers to “re-balance the tax burden among homeowners and business interests.” That means that a reduction in business tax revenue would automatically be shifted to other property owners. The report notes that tax cuts for businesses decrease business costs and add to profitability. Doing so can encourage companies to relocate or make new investments.

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