INDIANAPOLIS | Gov. Mike Pence refused to rule out county income tax hikes as a replacement for the more than $1 billion Indiana schools and local governments stand to lose if he succeeds in eliminating the business personal property tax.
The Republican, who spent his first months in office fighting to reduce the state income tax rate, told reporters Wednesday that terminating property taxes on business and manufacturing equipment is the top item on his tax reform agenda, but he will leave the details to the Republican-controlled Legislature.
Pence repeatedly dodged follow-up questions asking if he'd accept a plan that calls for higher local income taxes if it meant eliminating the business personal property tax.
"I don't want to prejudge that debate; I want to be open to ideas in the legislative process," Pence said. "There's ... different kinds of taxes that could replace that, that wouldn't be such a barrier to economic growth."
The governor claims Indiana's business personal property tax — which produces 17.5 percent of Lake County's property tax revenue and 13.4 percent of Porter County's — discourages businesses from locating in the state, despite Indiana's otherwise top-rated business tax climate.
"I think most people know that the business personal property tax is a barrier to the kind of investment that creates jobs in Indiana," Pence said. "How we go about phasing that out is a subject of an important discussion in the state of Indiana, and I look forward to having that with people across the state and with their elected representatives in the upcoming session."
Among the options, Pence said, is reducing the tax over an extended period of time, or leaving the decision to eliminate the tax to individual counties.
"I look forward to a good debate about how we do that in a way that doesn't disadvantage local communities, doesn't put an undue burden on local communities, and I'm confident we'll have that debate in the weeks and months ahead," he said.
In 2012, Lake County collected $109 million in business personal property taxes, with $37 million of that going to schools. The county's income rate would have to double to 3 percent to make up that revenue.
Lake County residents then would be paying a combined state and local income tax rate of 6.4 percent, well above Illinois' 5 percent income tax rate that's set to drop to 3.75 percent in 2015.