Saturday, February 8, 2014

Hayden: Pence Pledges Business Tax Elimination

By Maureen Hayden in the Greensburg Daily News:

Despite intensifying opposition from mayors around the state, Gov. Mike Pence is re-affirming a pledge to eliminate a tax on business equipment worth $1 billion to local governments.

Pence said he wants to eliminate the tax to boost job creation, but he still has not detailed plans to replace lost tax revenue for communities or prevent a shift in the tax burden to homeowners and other property owners.

During a Statehouse press conference Thursday, Pence said he’s “in negotiations” with legislative leaders. The House and Senate have bills that would begin to phase out the business personal property tax in different ways, but neither bill replaces the lost local revenue.

Pence said the legislation need to be improved but declined to elaborate.

"I know you all want me to talk about details,” he said after repeated questions about how he’ll avoid what he calls “undue harm” to local governments. "I don't want to negotiate this in public.”

The governor’s comments came the same day an independent report projected significant lost tax revenues for local governments and $376 million worth of increased taxes on homeowners, farmers, landlords and other property owners should the business tax be eliminated.

Those property owners would see tax bills increase 12 percent or more in 24 of Indiana’s 92 counties, according to the report issued by the non-partisan Indiana Fiscal Policy Institute.

The report also found that eliminating the tax would have minimal effect on luring new jobs to the state, but it could pit Indiana communities against each other in attempts to attract business development.

Pence told reporters he had not read the report but believed it would add to the ongoing debate.

According to a report from the Legislative Services Agency, which provides analysis and research to the legislature and public, a statewide elimination of the business personal property tax would reduce revenues for Decatur County governmental units by about $1 million. The city of Greensburg would see its revenues decline by $425,000, the county would lose $170,000, and Greensburg Community Schools would face a revenue drop of more than $300,000.

Because of the mechanism through which local governments are funded, the governmental units would make up a portion of that revenue reduction through higher property tax collections from homeowners. However, they likely still would face a substantial revenue reduction, which means that to balance their budgets, local cities and schools likely would have to either cut expenses, raise revenues through other means, such as higher income taxes, or do both.