The business personal property tax is a levy on business equipment that generates about one billion dollars a year for local governments.
Indiana Chamber of Commerce Vice President Bill Waltz says the tax prevents businesses running on slim margins from making new purchases and expanding their operations.
“The cost of production is increased when this tax is added on top,” Waltz says. “So it makes them less inclined to take that step of investing in what it is that they know they need to grow and expand.”
Waltz spoke at a hearing Tuesday on a piece of legislation before the House Ways and Means Committee that would give counties the option of keeping or removing the tax on new equipment purchases.
But members of the Indiana Association of Cities and Towns also testified that removing the tax without any replacement revenue would leave them in a tough financial situation.
Terre Haute Mayor Duke Bennett says he understands the state need to be competitive, but says if the tax is reduced, cities would have to cut services.
“It would be a devastating loss to the city,” Bennet says. “We can’t be an economic engine if that happens. If we don’t have good police and fire and streets and parks, people aren’t going to want to do business in Terre Haute anyway.”
Bennett says local governments are still trying to make up for property tax caps imposed in 2010 and additional revenue loss would be extremely difficult to handle.
South Bend Mayor Peter Buttigieg added he fears giving each county the choice to retain or eliminate the tax would pit local governments against each other in what he called a “race to the bottom.”
Buttigieg says that would undermine a regional coalition he and others are attempting to create to generate economic growth.