Elkhart County officials dubious of business tax cut package without replacement revenue

The state proposal, still to be signed by Gov. Mike Pence, would let local communities reduce the business property tax.

Posted on March 14, 2014 at 2:07 p.m.

Indiana lawmakers didn't follow through on Gov. Mike Pence's call to completely do away with the state's tax on business property, a source of concern among many local Elkhart County leaders.

The measure approved late Thursday, March 13, leaves the decision to individual counties. And locales would only have limited authority — to halt the tax on new business property and/or eliminate the tax on companies with less than $20,000 worth of property. There's no mechanism to completely do away with the tax, as first proposed by the governor.

Still, concerns and criticism here persist.

The business tax cut proposal
The measure approved Thursday was a melding of Senate Bill 1 and House Bill 1001, separate proposals put forth on the business tax elimination question. According to the Indiana Association of Cities and Towns, which also has reservations:
  • It would give locales in individual counties the authority to eliminate the business tax on new business property and/or halt it for businesses with less than $20,000 worth of personal property.
  • Elected city, town or county officials could start the process by passing resolutions to implement a cut. Then the other taxing units would have to take up the question as well, and if elected bodies collectively representing more than half a county's population backed a cut, it would go into effect. Schools, township and library systems would not be authorized to weigh in.
  • The measure, to go into effect July 1, 2015, would also allow locales to offer property tax breaks to individual businesses for up to 20 years. As is, they may offer such cuts, used to lure business, for only up to 10 years.
  • It also gradually reduces the corporate tax rate from 6.5 percent in 2016 to 4.9 percent by 2022, according to the Indiana Business Journal.

"It's a poorly conceived idea. It's a poorly developed idea," Elkhart County Commissioner Mike Yoder said Thursday afternoon, ahead of expected passage of the measure, which still has to be signed by Pence.

He's all for eliminating the tax on business property, applicable to machinery and equipment, even desks and computers. Such a move would improve the business climate, encourage new economic development. But if state lawmakers are going to go that route, Yoder said, they need to come up with a way to replace any revenue lost to cuts so cities, schools and counties that rely on the funding aren't left in the lurch.

Local governmental units — cities, schools, townships, library systems, county government — have been hit hard by the loss of revenue brought on by property tax caps, which limit taxation on homes and other real estate. Any further loss via a reduction in the business property tax — a major focus of debate this legislative session — compounds those losses, makes it even tougher.

"We're just trying to keep up with the changes that have been already approved in the past," said Doug Hasler, executive director of support services for Elkhart Community Schools.

Giving local officials the option to implement the tax cut as opposed to making it mandatory makes the measure more palatable, but, like Yoder, he voiced support for inclusion of a mechanism to offset any losses. As is, Elkhart schools will have two questions on the May 6 ballot asking for property tax hikes to generate new funding to help offset losses due to tax caps.

Kyle Hannon, head of the Greater Elkhart Chamber of Commerce, has also called for replacement revenue if the business property tax is to be reduced. Otherwise, he backs the notion of a cut, which would make it cheaper for companies to do business.

"It is a disappointment," Hannon said in an email Thursday, as the legislation headed toward approval, "because the elimination of the business personal property tax could have been very exciting if the state had paid for replacement revenue."


 Goshen Mayor Allan Kauffman doesn't like that the process would leave schools and townships out of the process. He also thinks lawmakers aren't considering all the possible consequences.

"I just wish they would take a deep breath," Kauffman said.

Elkhart Mayor Dick Moore worries about competition between counties to attract business, if some implement cuts and others don't. Given the mechanism to implement tax reductions (see the infobox), he also worries larger governmental units within a county could force implementation of a cut even if smaller units weren't on board.

Yoder, who doesn't foresee advocating any tax cut here per the measure's provisions, sees at lease one bright spot — the legislation wouldn't go in effect until mid-2015. Thus, lawmakers could theoretically change the measure, rework some of its provisions, ahead of that in the 2015 legislative session.

Follow reporter Tim Vandenack on Twitter at @timvandenack or visit him on Facebook.


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