INDIANAPOLIS | The Republican-controlled General Assembly approved a package of business tax cuts, during its final meeting of the year Thursday, that supporters believe will create jobs by making Indiana stand out as a low-tax haven for companies.
Senate Enrolled Act 1, which now goes to the governor, steadily reduces the state's corporate income tax rate from 6.5 percent next year to 4.9 percent by 2021.
It also gives counties the option of eliminating the business personal property tax on new equipment, on companies with less than $20,000 in taxable business equipment, or keeping the tax as is.
In addition, cities and towns could abate local business taxes for up to 20 years starting in July 2015, instead of the maximum 10 years allowed under current law.
"This is a strong bill that will allow Indiana to be the destination of choice for new investment," said state Sen. Brandt Hershman, R-Buck Creek, the sponsor. "We've seen tremendous success from our prior efforts in business tax reform; this secures Indiana's spot, not only as leader of the pack when it comes to our neighbors in the Midwest, but nationally."
When fully implemented the corporate income tax cut will reduce state revenue by approximately $132 million a year. The impact on local governments will depend on whether they choose to eliminate the business personal property tax on some or any business taxpayers.
There is no state replacement revenue provided for counties that get rid of the tax. Statewide, the business personal property tax contributes more than $1 billion a year to schools and local governments.
State Sen. Karen Tallian, D-Ogden Dunes, said Indiana can't afford another business tax cut, on top of the $6 billion doled out over the past decade, when the state has so many unmet needs, including health care and education.
"The corporate tax rate is not the only invitation for business," Tallian said. "What corporations constantly say is that they look at quality-of-life issues -- and how is Indiana going to fund those?"
The legislation, which passed the Senate, 36-12, and the House, 63-37, on nearly party-line votes, is a far cry from the full repeal of the business personal property tax initially sought by Republican Gov. Mike Pence.
Nevertheless, he is expected to sign it into law.