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Legislature Close to Resolution On Business Tax Bills

Indiana State House

Photo: Jasont82 (Wikimedia)

Changes made Tuesday may reduce the fiscal impact to local governments

There are only one or two major differences left between House and Senate versions of legislation reforming the state’s business personal property tax.

The original House legislation gave local governments the option of eliminating the business personal property tax on new equipment.

The Senate version eliminated the tax statewide on small businesses, which compromise about 70 percent of those that pay the tax. That version would have cost local governments statewide about $25 million a year.

It also further reduced the state’s corporate tax.

House and Senate fiscal committees today approved changes that include the corporate tax reduction and create a new “super abatement.”

Local governments can currently abate the tax for ten years. The House and Senate bills each at least double that.

But the Senate didn’t include the House’s local option and House Ways and Means Chair Tim Brown says his chamber feels strongly about that feature as an engine for economic growth.

“When you have people coming in and putting new money in equipment and the buildings that surround equipment, you spur job activity, you spur sales investment, you spur just the local economy,” he says.

Brown says the House did not include the complete elimination on small businesses because he wanted to wait until the Senate made changes.

Today’s alternations also mean the tax elimination will cost local governments about $13 million, as opposed to $25 million in the original legislation.

But neither House nor Senate bills include replacement revenue, and South Bend Democratic Senator John Broden says local officials are concerned.

“Doing any type of phase-out – even partial – is premature until we begin to talk seriously about what the replacement revenue’s going to be,” he says.

Senate Appropriations Chair Luke Kenley says he doesn’t think the state is in the position to provide replacement revenue.

“The state is taking a hit when we reduce the corporate income tax and we think that’s more than our fair share. We’re sharing the pain, I guess.” he says.

Governor Mike Pence has said he’s open to using state money to provide replacement revenue for local governments, though he didn’t specify how.

Both bills now head to their full chambers.

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