Indiana legislators face a tough challenge as they attempt to deliver a knockout blow to the state’s business personal property tax.
And a lot of the problem can be laid at their own feet, according to a recently released study by the Indiana Fiscal Policy Institute.
The goal of the group — a private, governmental research non-profit — is to enhance government effectiveness and accountability by educating Indiana’s business, labor and government leaders on fiscal policy issues.
The business tax is one of those issues.
Gov. Mike Pence has said abolition of the tax is high on his priority list, and with a strong majority in both houses, Republicans see their way clear to doing just that.
But even the governor has said he doesn’t want to hurt local government or schools, which depend on the tax for a large chunk of revenue.
Most of the discussion has revolved around how to replace any loss rather than simply forcing educators, cities and towns to further tighten their already tight belts.
The problem, as the 36-page institute paper points out, is the state’s property tax cap, first a law and now a constitutional amendment, immensely complicates the chore.
The paper’s authors point out Indiana is almost surrounded by states that have already eliminated the tax, levied on property such as heavy machinery and equipment, that businesses use to make things.
Kentucky is the only neighboring state that still has the tax, and it’s lower than Indiana’s.
They also point out Indiana has the highest percentage of manufacturing jobs of all the states, and it is heavy manufacturing — where the best paying jobs are usually found — that has the highest tax liability. Taxes don’t attract new industry, they point out, but add recent studies also don’t show it is a major factor in plant location.