INDIANAPOLIS | A plan to further reduce Indiana's corporate income tax rate and exempt small businesses from the personal property tax was approved 7-2 by a Senate committee Tuesday.
Senate Bill 1, which now goes to the full Senate, cuts the tax on corporate income from the current 7 percent to 6.5 percent next year and finally to 4.9 percent in 2019. Just three years ago, the corporate income tax rate was 8.5 percent.
"Other states have looked to Indiana's leadership and they are copying us," said state Sen. Brandt Hershman, R-Buck Creek, sponsor of the proposal. "We cannot stand still."
The tax cut will reduce state revenue by $121 million a year when fully implemented. Hershman has proposed halving the state's research and development tax credit and eliminating other credits to save $26 million a year.
State Sen. Karen Tallian, D-Ogden Dunes, voted against the measure. She said Indiana can't keep cutting corporate taxes without a plan to replace the lost revenue, which she said totals $250 million from 2011-19.
"They're not going to cut the sacred cow of the surplus, so the only thing that they can do is cut services," Tallian said. "That's a quarter billion dollars out of schools, roads and everything else."
The legislation also exempts companies with less than $25,000 in taxable personal property from the business personal property tax. That's about 71 percent of Hoosier businesses.
Eliminating the tax on those businesses will reduce revenue for schools and local governments across Indiana by a total of $24.1 million a year, according to the nonpartisan Legislative Services Agency.
There is no revenue replacement for that money in the proposal.