INDIANAPOLIS (AP) — Indiana Gov. Mike Pence's call to
eliminate the personal property tax for businesses could end up raising
taxes for homeowners and residents throughout the state, depending on how
local governments react, according to a legislative report completed Monday.
Analysts for the nonpartisan Legislative Services Agency determined that the
tax would amount for about $1.06 billion in proceeds for local government in
2015, creating budget havoc if it were completely removed. Property taxes
paid by homeowners and others could increase by $375 million a year and
local income taxes could increase by an average of .77 percentage points if
they were used to counter the lost money, wrote Bob Sigalow, an agency
analyst, in a memo to state lawmakers.
Pence has made eliminating the tax a centerpiece of his second-year
legislative agenda, arguing that it is necessary to help spur job creation,
in part by attracting new business. The governor has said he would try to
find some way to offset any impact on local governments, but he hasn't
offered specific details about how he would accomplish that.
A Pence spokeswoman was not immediately available for comment Tuesday
The personal property tax is levied on business equipment throughout the
state and is largely borne by the state's heavy manufacturers. The agency
determined that about 453,000 business personal property tax assessments
were paid throughout the state in 2013 on about $49 billion worth of
If local income taxes are relied on to replace the tax, the average jump in
income tax of .77 percentage points would easily wipe out the tax cut Pence
secured earlier this year. Lawmakers approved a 5 percent cut in the state
income tax, rolling the tax rate from 3.4 percent back to 3.23 percent. And
local income taxes could jump as much as 2 percentage points in some
counties, according to the agency.
The General Assembly begins its "short session" — a roughly two month
meeting — the second week in January. Budget leaders in both the House and
Senate have also been apprehensive about considering new spending or tax
cuts until lawmakers meet for their "long session" in 2015, when they take
up their next biennial budget.
David Bottorff, executive director of the Indiana Association of Counties,
said that other states that eliminated the business personal property tax
covered the losses for local governments. He noted that Illinois'
reimbursement for local governments is included the state's constitution.
"We'll be seeking the state to replace that money," he said.
Bottorff recommended the state offer tax credits for the value of the
personal property tax paid by each business, thereby footing the bill. But
he said new budget estimates showing that state tax collections are expected
to come in about $298 million lighter than expected could hurt that request.