by State Sen. Jim Banks (R-Columbia City)
During his term, former governor Mitch Daniels was often quoted as saying, “You’d be amazed how much government you never miss.” In my service with the General Assembly throughout the past four years, I’ve centered my work on that idea by promoting legislation that reduces the size and scope of government, while also cutting taxes.
The Indiana State Senate recently approved a measure that focuses on those goals. Senate Bill 1 would boost Hoosier job and economic growth by cutting the corporate income tax and finding a fiscally responsible way to reduce the burden of the business personal property tax. These changes will ensure Indiana stays ahead of the curve in job creation and remains an attractive place to do business.
Economists report that the corporate income tax is the most harmful tax to economic growth. While corporations incur its cost, its impact is actually felt by workers who earn lower wages, consumers who pay higher prices for goods and services, and shareholders who receive less income from their investments.
Our state’s corporate income tax rate currently ranks in the middle of the pack nationally, but with the changes SB 1 proposes, our rate would become the second-lowest in the country. That kind of change will lead more employers to consider Indiana when relocating their businesses, further bolstering our economic competitiveness.
But that’s only half of the SB 1 mission. It also reflects Gov. Mike Pence’s goal of repealing 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. It’s especially harmful to small businesses that often struggle to root their operations in new markets.
However, the obvious challenge to cutting the personal property tax is that local governments and schools heavily rely on its revenue. That’s why instead of getting rid of the tax altogether, the Senate plan exempts businesses with less than $25,000 of personal property in a county. Because personal property tax liability is skewed toward large businesses, this exemption would apply to two-thirds of tax filers without straining local government budgets. In total, SB 1’s personal property tax exemption is projected to reduce local government revenue by $31.5 million a year – only 0.5 percent of total property tax revenue to local governments statewide.
In fact, it often costs more to file the personal property tax than the tax itself is actually worth. That unnecessary government red tape removes much-needed resources from our developing small businesses with little financial benefits to local governments. With the changes in SB 1, losses in revenue for local governments would be partially offset by reduced administrative costs, with fewer businesses needing to file personal property tax returns. In turn, SB 1 would put more than $130 million a year into the private-sector economy.
The Senate is taking this issue very seriously. We’ve heard testimony from both state and local government leaders, and as these discussions progress, we’ll continue to aim for a fiscally sound solution that benefits all sectors involved. I look forward to reaching a conclusion that puts Indiana in the best position to further improve job creation and economic development efforts statewide without straining local governments.