Legislators are wrestling with ways to slash another property tax without busting local-government budgets.
All Indiana‘s neighbors except Kentucky have abolished the personal property tax, which taxes machinery and other equipment at factories and farms. Two Republican senators have drafted bills to reduce the tax burden.
Kokomo Senator Jim Buck‘s bill would extend the depreciation on taxable equipment. Business owners currently must pay taxes on at least 30 percent of equipment‘s original value, no matter how old it is.
Buck proposes dropping that floor to 20 percent, a tax break estimated at $300 million.
Senate Tax and Fiscal Policy Chairman Brandt Hershman (R-Buck Creek) has suggested giving each county the option of doing away with the tax.
Terre Haute Mayor Duke Bennett (R) says he has already had to cut spending by one-fourth to deal with property tax caps.
“Things like this are good decisions to make, but local municipalities need to be able to maintain those things that we‘re responsible for. And if we keep taking revenue away, then 10 years from now, we‘re not going to be competitive,” he says.
He says taking away more tax dollars would jeopardize the ability to provide city services — and without those basics, he says businesses won‘t come, no matter how attractive the tax rate.
The Indiana Chamber, Farm Bureau and other business groups are endorsing tax relief.
Tim Rushford with the Indiana Manufacturers Association notes Indiana has the highest concentration of manufacturing in the U.S., and says the current tax structure for equipment is unfair.
“We‘ve got a lot of expensive stuff, a lot of industrial machinery and equipment,” he says. “And with the 30-percent floor, for example, you could have a 100-year-old or an 80-year-old or pick-the-year piece of equipment that you‘ve owned a long time, and you‘re going to continue to pay at least 30 percent of the cost.”
But business groups acknowledge the proposals can‘t move without some way to make up the money.