Pence plan for business tax cut would hit schools, local governments hard

2013-12-08T22:30:00Z 2014-01-11T18:30:17Z Pence plan for business tax cut would hit schools, local governments hardBy Dan Carden dan.carden@nwi.com, (317) 637-9078 nwitimes.com
December 08, 2013 10:30 pm  • 

INDIANAPOLIS | Indiana schools and local governments will lose about a sixth of their total property tax revenues if Gov. Mike Pence succeeds in eliminating the business personal property tax.

The Republican governor said Thursday he believes permanently removing the tax on business and manufacturing equipment will create jobs by attracting new companies lured by improvements to Indiana's already top-rated business tax climate.

Pence promised to push the Republican-controlled General Assembly to cut the tax when lawmakers begin meeting in January. The tax cut also is strongly supported by House Speaker Brian Bosma, R-Indianapolis, and the Indiana Chamber of Commerce.

Statewide, business personal property tax collections for 2012 totaled $1.04 billion, including $109 million in Lake County (17.5 percent of county property tax revenue) and $25 million in Porter County (13.4 percent).

In both Lake and Porter counties, schools receive more property tax revenue than any other government entity -- 34 percent in Lake County and 42 percent in Porter County -- meaning schools would suffer the biggest revenue hit if the business personal property tax is eliminated and not replaced.

Data detailing the specific effects on individual school corporations or municipalities was not available through Indiana's Gateway reporting system on local government finance.

But overall, Lake County schools stand to lose $37 million and Porter County schools $10.5 million under Pence's proposal.

Revenue for Lake County cities and towns would drop $32 million, funding for county government would fall $18.5 million, libraries would lose nearly $5 million, townships almost $3 million and other taxing districts $13.5 million.

In Porter County, city and town revenue would decline $5.5 million, county government would lose $4.75 million, libraries $1 million, townships $750,000 and other taxing districts $2.5 million.

Those annual losses would be in addition to the effects of state property tax caps, which already sap $130 million a year from Lake County schools and local governments, and $12 million a year from Porter County entities.

Pence pledged to phase out the tax in a way that "does not unduly harm our local governments' abilities to meet their obligations." He had no details on how that would work when he named it as the top priority of his 2014 legislative agenda.

Bosma hinted the legislation may allow each local government to decide whether to give up the business personal property tax. However, a similar choice option for county income taxes eventually led to the state's punishing Lake County when it refused to join the 91 other counties in imposing an income tax.

"We'll propose a solution that will give local communities the opportunity to make this decision, to make their county more attractive, to attract new investment from out of state and new investment from existing employers in a fashion that doesn't unduly oppress local units and schools," Bosma said.

House Democratic Leader Scott Pelath, D-Michigan City, is skeptical another business tax cut is the answer to Indiana's struggling economy.

He suspects the tax burden ultimately will be shifted onto Hoosiers, whose per capita incomes are lower than residents of 40 other states.

"Consistently cutting taxes for those with all the power and all the money is not doing anything for middle-class pocketbooks," Pelath said.

"This trend toward more corporate giveaways is going to end up hurting families who will not find much protection from the property tax caps, and local units of government that again will be forced to choose to cut services or increase fees to pay for them."

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