By John Ketzenberger in the Indianapolis Star:
As the top fiscal adviser to Gov. Mike Pence, it was Chris Atkins’ job last week to testify on Senate Bill 1, the governor’s intriguing proposal to repeal the business personal property tax in Indiana.
Given the proposal’s high profile, Atkins’ calm testimony before the Senate Tax and Fiscal Policy Committee was decidedly low key — especially in contrast to the drama surrounding House Joint Resolution 3, the proposed constitutional amendment to prohibit same-sex marriage.
Atkins spent five minutes telling senators why the Pence administration supports SB1 and then matter-of-factly answered their questions. This occurred at the same time the HJR3 drama was unfolding in the House, as Speaker Brian Bosma moved the resolution from one committee to another to ensure passage.
Count me among those who like the more deliberate route that lawmakers have taken with SB1 and its counterpart House Bill 1001. But I’m still going to argue for a timeout to give the state more time to digest all the tax cuts granted in the last session.
The two bills that have emerged from Pence’s proposal take distinctly different paths to achieve the goal he set forth to make Indiana’s business tax structure even more attractive for investment. The bill being considered in the House is an interesting twist on Pence’s proposal, while the Senate version is an imaginative gumbo that includes reducing the corporate income tax.
In a nod to home rule by the General Assembly, the House bill allows counties to decide whether to exempt only new business personal property effective as early as 2015. This would reduce the immediate effect of tax revenue lost by local governments and schools, which would continue to collect tax on existing business personal property.
The effect of an exemption would vary widely from county to county, according to a fiscal impact statement prepared by the Legislative Services Agency.
If all counties adopted the exemption, the minimum decline in assessed valuation of business personal property over a 10-year period would be $2.4 billion, a comparatively small amount of the total gross assessed valuation of $37 billion. But if all businesses replace all existing business personal property — machinery, office equipment and the like — during that 10-year period, local governments will lose all of the property tax associated with the assessed value of that property.
Local governments already can abate taxes on business personal property as an incentive to lure companies on a case-by-case basis, which is a much-different decision than exempting all new investment.
This is a drawback to the House bill because it may pit neighboring counties or regions of the state against each other to attract or retain existing businesses, instead of trying to bring new investment to the state.
The Senate bill would eliminate the personal property tax for all businesses with less than $25,000 in taxable property. This would eliminate the tax on 71 percent of all businesses and cause a net reduction of property tax collections of $13.1 million in 2016, according to the Legislative Services Agency.
Contrast that with the nearly $1 billion a year that would be hit under a total elimination and it’s easy to see the largest businesses pay the most tax by far. In exchange for maintaining the business personal property taxes on the largest companies, the Senate proposes to reduce the state’s corporate income tax from 6.5 percent to 4.9 percent in 2019. This reduction would cost the state about $107 million a year in tax revenue after a bevy of existing tax credits for business are reduced or eliminated.
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See the full article here:
http://www.indystar.com/story/money/2014/01/24/business-insider-lets-not-rush-on-business-personal-property-tax/4815253/
