Indiana Spends Less On Tax Incentives Than Its Neighbors

Indiana's tax incentives are performance-based, so companies cannot claim the benefits until after they have created jobs.

Daniels with Enerdel officials

Photo: Office of the Governor

Gov. Mitch Daniels speaks with officials at EnerDel, a company that received large tax incentive offers, but whose parent company filed for Chapter 11 bankruptcy earlier this year.

A recent New York Times study finds Indiana does not hand out as many tax incentives as its neighboring states. Officials at the state’s head economic corporation say that’s because its tax breaks are performance-based.

Indiana spends just more than $900 million each year on tax incentives, according to the NY Times report. Indiana’s neighboring states all handed out more than $1.4 billion each in tax breaks with Michigan spending more than $6.6 billion.

But Indiana Economic Development Corporation spokeswoman Katelyn Hancock says even the $900 million is a high estimate because that is based on the total tax breaks the state initially offers, not what it actually pays out.

“Our offer, which again is performance based, is probably going to be paid over a long period of time after jobs are actually created versus paid out the door this year,” Hancock says.

The company that received the largest tax incentive in the past five years was Metal Technologies Inc., which was offered more than $35 million in corporate income tax credits and free governmental services.

The two companies that received the next largest incentives were Bright Automotive and EnerDel. They were offered more than $24 million each. Bright Automotive filed for Chapter 7 bankruptcy, and Ener1, EnerDel’s parent company, filed for Chapter 11 bankruptcy earlier this year. Ener1 has since re-emerged after a restructuring process.

Fiscal Policy Institute Director John Ketzenberger says even though the state received criticism for the investment, it is part of a larger trend.

“I think what we see is this dynamic period in the economy when we’re really shifting from one form of economy, Indiana is heavily manufacturing, to another form of economy, making things that are higher tech, and the economy is not stable for those kinds of things,” he says.

Hancock says she did not know if the two companies received any tax incentives before they declared bankruptcy, and an EnerDel spokesman says the company has not claimed anywhere close to the amount that was offered in tax incentives.

Hancock adds that as a part of the IEDC’s policy, its lawyers work to recover any tax breaks companies claim if they have not produced the jobs they promised.

Gretchen Frazee

Gretchen Frazee is a reporter/producer for WFIU and WTIU news. Prior to her current role, Frazee worked as the associate online content coordinator for WFIU/WTIU. She graduated from the University of Missouri-Columbia where she studied multimedia journalism and anthropology. You can follow her on Twitter @gretchenfrazee.

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