Tuesday, June 24, 2014

Star: Indiana Needs Comprehensive Tax Reform

From the Indianapolis Star:

On Tuesday, tax experts from around the country will gather with Gov. Mike Pence to discuss policies that could fuel economic growth, spur job creation, and sustain prosperity across the state. Indiana has been a leading “growth” state in recent years, and with the right reforms, it is poised to keep — or even exceed — that momentum.

Simple tweaks to Indiana’s tax system will be insufficient to attract leading firms and spur the success of those at home; reforms must be part of a well-planned growth strategy. If the Hoosier State wants to position itself as a global competitor, its leaders must approve a comprehensive plan that lightens the tax burden on citizens and businesses in a way that allows government to serve the people by performing its core functions.

Fortunately, Indiana’s economy is doing well. In April, its unemployment rate was 5.7 percent, compared with 6.3 percent nationally. The American Legislative Exchange Council ranks its economic outlook as an impressive third in the nation.

While CNBC and Forbes both rank it in the top 20 states for business, Indiana lacks some specific measures. CNBC ranks the state 37th in access to capital — an important indicator of future growth. Furthermore, the state does not compete to attract businesses with just 49 other states — it also competes with countries around the world.

Greater prosperity usually is preceded by two things: business investment (either by in-state or outside interests, both large and small), followed by an increase in hiring. Investment flows to places that businesses find attractive for competing globally.

Consider the case of a small bookstore owner who sells more books than she can supply. In order to hire an additional salesperson, she must invest in more counter space, install a second cash register, expand her shelves, and purchase more books. Only at this point can she can hire an additional staffer.

Before implementing reforms to Indiana’s revenue system, lawmakers must ask a few simple questions: Will this proposal encourage investment, innovation and hiring? Will it treat all businesses equally, or pick winners and losers? Will it make the system less complex and more accessible?