TERRE HAUTE —
Changes are almost certainly coming to Indiana’s business personal property tax — but it’s not yet clear what those changes will be.
An Indiana Senate committee gave its blessing Tuesday to a bill exempting small businesses from paying the tax. The House Ways and Means Committee was expected to pass a different bill today. That version would allow counties to opt out of the tax on new investment while continuing to collect revenue on existing business equipment.
Mayor Duke Bennett, who has been concerned about cutting the business personal property tax for months, said he was somewhat relieved and surprised that neither version of the bill called for totally eliminating the tax. He testified before the House Ways and Means Committee last week, stressing the importance of business personal property tax revenue to local governments. A big cut in that revenue would harm services, such as local police and fire protection, Bennett has stated.
Still, Bennett remains concerned because there has been far less talk in Indianapolis about finding replacement revenue for any reductions in the tax.
“I’ve not heard anything about replacement revenue,” Bennett said Wednesday. Some lawmakers want to give counties the option of passing a local option income tax to make up for the loss, but that’s a “terrible idea,” he said. That places the burden on county councils; a replacement revenue solution needs to be a statewide solution, he said.
Likewise, “Replace don’t erase” is the mantra of the Indiana Association of Cities and Towns, said Matt Greller, the group’s executive director. If even just a single dollar of personal property tax revenue is lost to local governments, it needs to be made up, he said. Quality parks, police, fire and other local government services are at least as important to encouraging investment in the state as a lower business tax burden, he said.
“Local governments affect quality of life,” Greller said. IACT is not opposed to reducing the business personal property tax, but “on the flip side, we’ve got to keep local government whole,” he said. Until 100 percent replacement revenue is part of the deal, IACT opposes both the House and Senate bills, Greller said.
Meanwhile, the Indiana Chamber of Commerce, a big supporter of doing away with the tax, is encouraged by both bills, said Bill Waltz, vice president of tax and public finance for the business group. The chamber accepts that replacement revenue needs to be part of the discussion, but is less convinced every dollar lost in business personal property taxes needs to be fully replaced, he said.
Someday, the chamber would like to see Indiana’s tax on business equipment totally erased. But, until then, Senate Bill 1 and House Bill 1001 are a good start, Waltz said. The Senate version is good because it exempts businesses that pay only a tiny portion of the overall tax. In many cases, those businesses pay accountants more to figure their tax bill than they actually owe in the tax, he said. The House version is good because its impact would be felt only gradually as old business equipment is replaced with new, Waltz said.
“We’re glad the focus is there,” Waltz said of the attention on the business personal property tax, which the chamber calls an impediment to private investment in the state. Even if other taxes are increased through local option income taxes, for example, that would be better than taxing productive business investment, Waltz said.
“This tax is actually more detrimental than others,” he said.
Reporter Arthur Foulkes can be reached at 812-231-4232 or firstname.lastname@example.org