Businesses may swallow Daniels’ property tax plan despite initial grumbles about its implications:

Businesses are upset about the implications of Gov. Mitch Daniels’ plan to reform Indiana’s property tax system. And while they would certainly bear blows, executives may be discounting one of the proposal’s subtlest selling points: permanent tax stability.

“I don’t know if it’s too high or too low. But I do know that it’s locked in stone. And businesses love predictability,” said Matt Will, associate dean of the University of Indianapolis School of Business and director of its Graduate Business Programs. “They’ll grumble about it. But behind closed doors, they’ll be very happy about a 3-percent constitutional cap [on business property tax rates] while every other state in the nation debates about raising theirs.”

Daniels’ proposal would cap owneroccupants’ property taxes at 1 percent of a home’s market value. Rental housing would have a 2-percent cap, businesses a 3-percent cap.

Corporate leaders like Indiana Manufacturers Association President Pat Kiely aren’t thrilled with that prospect. Over time, he expects the disparity caused by those caps will grow and businesses will suffer.

“If this passed, [we’d] have the highest potential property taxes for business in the nation, and the lowest for home
owners,” Kiely said. “This may all look pretty good for the first few years. But we don’t all live in four-year terms. We need to take a longer-term perspective.”

Daniels would offset the lost revenue from lower homeowners’ property taxes by hiking Indiana’s sales tax to 7 percent. Business leaders are concerned about how that change would affect Indiana’s economy, particularly its retail sector.

“A penny never makes a whole lot of difference [to consumers]. But that does put us higher than our surrounding states,” said Purdue University economist Larry DeBoer. “It makes you wonder whether people will cross the border for purchases of automobiles and large appliances.”

But in the end, executives may accept Daniels’ tradeoff. Even if some parts taste sour, at least they’ll know what they’ll be swallowing.

“Businesses like as much predictability as possible. As much as we can do to assure businesses … that we have a predictable and stable system, is really important,” said Greater Indianapolis Chamber of Commerce President Roland Dorson. “Spit and chewing gum repairs aren’t going to cut it anymore.”