State Sen. Brandt Hershman (R-Buck Creek ) authored this year's Senate Bill 1 - legislation to boost Hoosier job and economic growth by reducing the state’s corporate income tax and business personal property tax. He shares his thoughts on the issue in this week's blog.
Over the past few years, Indiana has built a reputation as a state that works. In 2012, we were among the top 10 states for both private-sector job creation and overall economic growth. And though December employment numbers aren’t out yet, 2013 is shaping up to be another top-10 year for job creation in Indiana.
A key factor in Indiana’s performance is our fiscally responsible tax climate. Hoosiers recognize that low taxes can encourage job growth by making our state an attractive place to live for talented entrepreneurs and workers.
To stay ahead of the curve in job creation, Indiana officials must constantly monitor our tax system and ensure we remain an attractive place to do business. That’s why I’m authoring legislation in the Senate this year to reduce two taxes that harm Hoosier employers: the corporate income tax and personal property tax on business equipment.
Many economists report the corporate income tax is the most harmful tax to economic growth. While corporations foot the bill for this tax, its burden is actually paid by workers who earn lower wages, consumers who pay higher prices for goods and services, and shareholders who receive less income from their investments.
My plan, Senate Bill 1, would reduce these negative effects, cutting corporate income taxes by about $130 million a year once fully implemented. This money would decrease state tax revenue, which is operating with a surplus.
Indiana’s corporate income tax rate currently ranks in the middle of the pack nationally, but with the changes I’m proposing, our rate would become the second-lowest in the country. That kind of change will lead more employers to take a close look at Indiana when making location decisions, bringing Indiana to a new level of economic competitiveness.
Of course, corporate income is just one means through which government taxes employers. Gov. Mike Pence deserves credit as a leading voice for the repeal of Indiana’s personal property tax, which is levied on business equipment. This tax – which three of our four neighboring states have done away with – is a direct obstacle for businesses looking to expand their operations and invest in new technologies. But the challenge to cutting personal property tax is that local governments and schools rely on it heavily for their budgets.
My plan finds a fiscally responsible way to reduce the personal property tax and provide relief to small businesses across the state. I’m seeking to end the tax for all businesses with less than $25,000 in personal property in a county. Because personal property tax liability is skewed toward large businesses, this exemption would apply to the vast majority of tax filers without busting local government budgets. A state fiscal analysis predicts that the tax exemption would reduce local government property tax revenue by less than one percent.
Small businesses are the backbone of any healthy economy, so tax reform geared specifically toward them can provide a major economic boost. It’s my hope that a personal property tax exemption will give developing businesses more opportunity to establish themselves in the market.
These are exciting times for our state. While Washington, D.C., and many states struggle to fill budget holes, Indiana’s government has built a surplus that allows us to cut taxes for Hoosier homeowners, workers and business owners. The legislation I’ve introduced in the Senate seeks to keep the ball rolling so we can continue to attract new jobs and build our reputation as a state that works.