House, Senate OK corporate tax plans despite protests

The House and Senate approved bills Thursday to reduce the business property tax just hours after local government officials from across the state joined to protest the legislation.

Representatives from Indiana counties, police, fire chiefs, schools and local government officials said they are against the bills – which would partially eliminate the business personal property tax – because the proposals don’t directly provide additional revenue to supplement the funds that would be lost.

“I think we all see this as the most significant piece of revenue loss coming down the road that local governments have ever seen in the state of Indiana,” IATC President Matt Greller said.

Republican Gov. Mike Pence has proposed phasing out the tax, which is levied on business equipment and supplies, and generates about $1 billion for local governments each year. But he’s also endorsed the House and Senate bills, which reduce – but don’t eliminate – the tax.

Under House Bill 1001 – passed 63-33 Thursday – counties would have the authority to decide if new businesses have to pay the tax on new equipment they purchase.

“This is a jobs bill,” said the bill’s author, Rep. Eric Turner, R-Cicero. “This is a bill that would create economic growth in our state.”

Senate Bill 1 – approved 35-11 Thursday – would lower the corporate income tax rate from 6.5 percent to 4.9 percent and eliminate the personal property tax for businesses that own less than $25,000 in business equipment and office supplies.

“This bill will help attract investment, support wage growth and help our state’s marketing effort,” Sen. Brandt Hershman, R-Buck Creek,

Although neither of the bills moving in the General Assembly would hit local governments as hard as the governor’s plan, leaders in both chambers have said the proposals could eventually lead to complete phase-out of the tax.

That’s what led local officials to launch the “Replace Don’t Erase” initiative, which they announced Thursday.

Greller said the effort was actually born in Michigan, where lawmakers have also proposed phasing out the business personal property tax over 10 years. But, Greller said, the Michigan General Assembly has made provisions to fully replace the revenue that local governments could lose.

“Eliminating the personal property tax may be the right thing for the state of Indiana. OK, we understand that,” Greller said. “What is more important is that we replace that revenue at the local level.”

Pence has said he doesn’t want to harm local governments, and that phasing out the personal property tax would attract businesses to Indiana and spur growth at existing businesses. Eventually, he’s said, the growth from those additional businesses and the jobs they create would help replace lost revenue.

But, local government officials say lawmakers should think about more than just helping businesses.

“We fear a focus on this kind of old school economic development is a race to the bottom, not a race to excellence,” said Angola Mayor Richard Hickman, president of the Indiana Association of Cities and Towns. ”When companies choose a community, deteriorating parks, failing infrastructure, deferred maintenance on buildings and sidewalks all speak to the quality of life and what they and their employees can expect in a city or town.”

Hendricks County Commissioner Larry Hesson said the state could impose an income tax to supplement the lost revenue. But, he said doing so could become an additional burden to citizens in counties heavily dependent on the business personal property tax for local funds.

“I’m not anxious to ask our citizens to pay more out of their pocket to give business tax payers a break, which is really what it is,” Hesson said. “There’s no information that’s available at this time that would tell us that doing so…would have any great impact on the attraction of businesses to this state.”

Law enforcement officials said eliminating the tax could create longer response times to emergencies and would force them to work with outdated equipment.

“We are seriously concerned, with my fellow police chiefs that I’ve talked about, about whether we’re going to be able to maintain the standard of public safety that our citizens have grown to expect and deserve from all of us,” Syracuse Police Chief Tony Cirillo said.

And, Indiana school organizations said they are concerned about losing funds for building maintenance, technology and school safety plans.

Greller said although both the House and Senate plans only partially eliminate the business personal property tax, they are the “first step in a long road” to fully eliminating it.

Despite the concerns local governments are raising, Pence sent a letter to mayors across the state Wednesday encouraging them to support the plan to phase out the tax.

“First, as we work toward phasing out the business personal property tax, I have committed to doing so in a way that does not unduly burden local governments' ability to provide for the needs of their citizens,” Pence said in the letter.

“Second, I have advocated for local control and decision making for adoption of any permanent phase out of the business personal property tax. Third, I have said that we cannot phase out this tax in a way that shifts that tax burden to hard-working Hoosiers.”

Leaders of the General Assembly are also standing by their bills.

House Speaker Brian Bosma, R-Indianapolis, said the House has already done “a great deal of analysis” on methods to replace lost revenue.

“If they choose to exercise this local options, we already have replacement income vehicles that would more than replace the anticipated impact of this,” Bosma said. “This is just an additional tool for local units of government. It’s one that I think is badly needed, and I don’t think it’s going to harm them.”

And Senate President Pro-Tem David Long, R-Fort Wayne, said “the most important thing in my eyes right now is to not handicap local government.

“There is a line between trying to tighten the reins a little bit on local spending and arming their ability to provide services,” he said. “That is a line we can cross if everyone’s aware of that and searching for a solution.”

But Sen. John Broden, D-South Bend, Sen. Karen Tallian, D-Portage, and Tim Skinner, D-Terre Haute echoed concerns they voiced earlier this week about the bill’s lack of reimbursement provisions. They each introduced amendments to add these provisions, but none were adopted.

In the House, Turner called his legislation “a jobs bill.”

But, House Democrats disagreed.

“This is one of the most important measures in front of this body and one of the most dangerous measures,” Rep. Ed Delaney, D-Indianapolis, said. “I guarantee you job losses under this bill. We’re making a big mistake if we go down this road.”

House Democrats echoed Senate Democrats' and local governments' concerns about creating an additional burden for citizens.

“What this does, if you pass this bill, is a tax increase on homeowners,” Rep. Greg Porter, D-Indianapolis, said. “Plain and simple, House Bill 1001 is not a good piece of legislation.”

Even though local governments don’t favor either bill, Greller said SB 1 is a “more thoughtful approach” to phasing out the tax.

“With a gun to my head, I’d prefer Senate Bill 1,” he said.