From the Fort Wayne News-Sentinel:
Many local government leaders in Indiana are worried about Gov. Mike Pence’s No. 1 legislative priority for the upcoming General Assembly session. He wants to eliminate the property tax on business equipment and machinery.
Supporters say few states tax the property of businesses as much as or more than Indiana, a glaring weak spot in an otherwise business-friendly tax environment. But local officials are concerned about losing $1 billion a year in revenues. They would need replacement sources of tax revenue or face cutting “vital public safety services and other things that residents absolutely need and expect,” said Matt Geller, executive director of the Indiana Association of Cities and Towns. “Every mayor that I have spoken with is deeply concerned about what the elimination of the personal property tax might mean to local government, to their cities.”
Pence says he wants to phase out the tax in a way that “does not unduly harm our local governments’ abilities to meet their obligations.” But local governing units have a reason to be skeptical. They have already seen huge drops in revenue from the state’s caps on property taxes. The Legislature limited annual taxes to 1 percent of assessed value for homes, 2 percent for rental property and farmland, and 3 percent for business property.
We’ve seldom seen a tax cut we didn’t like, and this one is especially attractive. Anything Indiana can do to attract new businesses will benefit the state’s long-term economic health and more than offset the pain felt by cities and counties having to tighten their belts another notch.
But Geller and other critics are right that it isn’t merely a matter of cutting a tax and calling it a day. Either a replacement source will have to be found for the lost funds or else services will have to be cut. If local governments are so resistant to cutting services that the state gives in, then somebody or something else will be taxed instead of business inventory. Every tax hurts someone.
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http://www.news-sentinel.com/apps/pbcs.dll/article?AID=/20131211/EDITORIAL/131219964/0/SEARCH
