MARCUS: A good bill benefits dinosaur buildings

“It is a simple concept,” he said. 

“Who are you?” I said.

“I, good sir, am Merton, the Mutton Merchant,” he said.

“And why are you intruding in my column?”

“To simplify matters for your readers,” Merton answered.

“Isn’t that my job?”

“If you did it better,” he replied, “you would not need the characters you invented in past columns.”

He threw down the challenge. In return, I determined to explain the Indiana Industrial Recovery Income Tax Credit without assistance from a fictional character.

Building owners or developers use the IRITC to reduce their costs in restoring or rehabilitating dinosaur industrial structures. A bill now before the Indiana General Assembly revises the program to permit credits for as much as 25 percent of the cost of rehabilitation, and the building need be only 50-percent vacant.

“What’s a dinosaur structure?” Merton asked.

“I was getting to that,” I blurted. “A dinosaur is a big, old, empty industrial building sitting in an area designated for economic recovery.”

“Why industrial?” Merton interrupted.

That was a good question. Why discriminate against residential or commercial properties? Indiana could speed up the rehabilitation of these properties by allowing income tax credits to be used more broadly.

It defies logic when the state elevates one type of property above another. A similar program for housing could cure neighborhoods statewide plagued by dilapidated homes. If we can lavish property tax reductions on homes, why not encourage investment in housing?

Merton remained mute.

I pressed on to a bizarre feature of the new bill: The size of the building suitable for an income tax credit is linked to the population of the community.

If a building with 75,000 square feet can be eligible for the IRITC in a county with 40,000 people, why shouldn’t a similar building in a county with more than 120,000 people be eligible? Again, the General Assembly imagines it is doing the right thing by discriminating against communities with more people.

What part of the state’s constitution permits the Legislature to say people in one town are more worthy than those in another?

“A petty concern,” Merton sneered. 

I fumed. After all, here is a good idea weighed down with a silly provision about population size. IRITC restores rundown urban areas. It revitalizes the historic centers of employment, areas already served by necessary infrastructure.

This beneficial legislation does not take property taxes from local governments. It is a tool for boosting a community’s property assessments. If uniform across the state, it could conquer the creeping obsolescence of industrial structures. It rewards responsible development.

In contrast to the IRITC, there is a bill in the General Assembly to lower the corporate income-tax rate. This is a cheap slap at Illinois, where the corporate tax rate just went up to offset that state’s serious deficit.

The argument that lower tax rates inevitably result in more jobs and more investment is wishful thinking disguised as everyday wisdom. No one knows what the response to lower tax rates will be when so many other factors play a role in hiring and investing. Good tax policy rewards positive actions already taken. It does not stand on the weak legs of hoping something beneficial will happen.

“Not bad,” Merton said. “Nonetheless, it is fortunate I was around to force you to be clear.”

“Oh, peddle your sheep meat elsewhere,” I sputtered. And he left.•

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Marcus taught economics for more than 30 years at Indiana University and is the former director of IU’s Business Research Center. His column appears weekly. He can be reached at mmarcus@ibj.com.