News From Terre Haute, Indiana

February 7, 2008

Property taxes, economic development highlight breakfast with the governor

More than 800 attend Thursday event

By Howard Greninger

TERRE HAUTE — Posed with a question about his tax plan, Gov. Mitch Daniels interrupted before the questioner could finish.

The start of the question stated that governmental units in Vigo County collectively would receive about $11.4 million less by 2009 under a state law. Daniels cut in to say that the question must be reframed from a taxpayer’s viewpoint.

“That means [property] taxpayers in Vigo County are gaining more than $11 million. That means that some people in Vigo County are being taxed more than others …,” Daniels told a gathering of more than 800 businesspeople early Wednesday at Hulman Center on the campus of Indiana State University. The breakfast event was sponsored by the Terre Haute Chamber of Commerce.

“It is not about how much government believes it must have of your money, it is about how much should you be expected to pay” for government, Daniels said.

The governor spoke about economic development as well as a plan to reduce property taxes through increasing sales taxes, using state wagering taxes, creating a new homestead credit and local option income taxes.

Attracting jobs is a never-ending task, the governor said.

“It’s like we’re filling a bathtub with the stopper out. It is a dynamic and competitive economy. In a free economy in which the consumer is master, any point in time some jobs could be passing out” of the state, Daniels said.

“It is our job in state government to build the best environment possible to attract new investors … to build the best sandbox possible … to constantly add opportunities for companies” and the marketplace, he said

Rod Henry, president of the Terre Haute Chamber of Commerce, said the governor’s plan is a tax swap from property taxes to sales tax. The Chamber is concerned that the tax shift results in lowering a tax that is deductible at the federal level to a tax that is not deductible, resulting in businesses paying slightly more in federal taxes, Henry said.

Daniels said he does not view that as a “stopper” to a property tax plan now under review in the Indiana General Assembly. “It still leads to a very positive outcome for many of the taxpayers … It may be a slightly smaller tax cut” for some taxpayers, he said.

“I will support and advocate a state spending limit, so we do not get into the habit of spending without the income,” the governor said.

State spending, he said, has gone up less than 2 percent in each of the past two state budgets over a four-year period. “It is proof it can be done,” Daniels said.

In his tax plan, Daniels advocates a 1 percent cap on property taxes to homeowners; a 2 percent cap to apartment owners; and a 3 percent cap on business.

“This is protection for the taxpayer. After the reductions, which do not cost counties anything, if there are still homeowners above the 1 percent limit, then they would not have to pay more than that and all the various units will have to find ways to absorb that,” the governor said after the event.

Daniels said the state will assume the full costs of education, under the new tax plan.

“In 89 of the 92 counties, there will be more money available in the future than there is now for the spending that is still required, and Vigo County is one of those,” he said. “There will be 6 percent more money available to the spending units than today. They might have to slow the growth of spending, but maybe that is not impossible to do,” Daniels said after the event.

Dan Tanoos, superintendent of the Vigo County School Corp., after the governor’s speech said he thinks Daniels’ “heart is in the right place for tax reduction, but I just hope [state officials] have thought it through to ensure that either the [state] Rainy Day Fund has enough to supplement when there is a downturn in consumer spending or another backup plan to ensure we have enough to run our schools as effectively as today,” Tanoos said.

Tanoos said the nation is likely in the early stages of a recession and less consumer spending would result in less sales tax and less funding for schools. That would result in a reduction of staff and classroom teachers, as employee salaries and benefits are the largest portion of the school corporation’s budget.

Faced with less funding, Henry said the Chamber is concerned that the Vigo County’s Economic Development Income Tax could be diverted from “helping to land or do preparation work to open the door for new job-creating companies” to simply just supplementing local government budgets.

Henry said it is time for local government officials to explore other ways to provide services, such as combining the weights and measures department, building inspection departments or even park departments at the county and city level.

Howard Greninger can be reached at (812) 231-4204 or howard.greninger@tribstar.com.