Kokomo Tribune; Kokomo, Indiana

Opinion

February 21, 2014

Local gov'ts endangered if business equipment tax lost

Governor, Statehouse should rethink tax cut plan.

(Continued)

A goal in killing the tax is tax equity, not imposition of a squeeze on local government and education, both of which are still adapting to the tax caps that limit actual tax dollars collected from most homeowners to no more than 1 percent of their home’s value.

Ways to make up the revenue lost with elimination of the business tax are limited.

One, a state tax increase, hasn’t even made it to the table.

Another would be to allow local taxing units to raise local taxes or fees to make up the losses.

That would not be a good choice for local government officials who would be faced with raising taxes to finance a problem the state laid at their feet.

A third, and the one most discussed, is to shift that loss onto other property taxes.

And that’s the bind.

If a homeowner has reached the cap, that home’s tax bill is frozen, only going up if the home’s assessed value increases.

The law shifts the burden of those lost dollars to other property owners, at least until those owners hit the cap.

Even worse than the inequity of that is its snowball effect, forcing up taxes on uncapped property until all property in a taxing unit reaches the cap.

When that happens, shifting stops and no additional money comes in to local government.

In some Indiana counties, often the largest and/or poorest, all or most property is already at the cap. For those counties, killing the business personal property tax would reduce income to local government units by the amount that had been raised by the business tax. This is not a spending freeze, but a cut in real dollars.

Monroe County Assessor Judy Sharp estimates that while this county is still far from its cap, the loss to local government units and schools would be about 8 to 10 percent of income if it does.

We urge extreme caution — and even a rethink — before adopting a plan that could seriously hamstring local government and schools in many Hoosier counties. Those local governments and schools provide services and training critically important to us all, including businesses looking for new locations.

— The Herald-Times, Bloomington

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