INDIANAPOLIS— A group of lawmakers unveiled a compromise Tuesday on a plan to reduce business taxes in the state, giving local governments the option to enact the reductions that could impact their bottom lines.
The development on the business personal property tax comes days before the Indiana General Assembly is set to end by Thursday and with many key issues still unresolved.
A key lawmaker called the product a “very strong merger” of Indiana House and Senate plans that had taken separate paths to reduce the tax businesses in the state pay on equipment and machinery. The compromise also maintains the reduction in the state’s corporate income tax found in the Senate’s proposal.
Sen. Brandt Hershman, R-Buck Creek, said the plan reflects input from a variety of groups who testified on the proposals many of them mayors of communities that would have faced revenue losses in the event the entire tax was phased out and pauses the implementation of any new powers to reduce the tax.
“It does put Indiana on the path toward maintaining our leadership role in business taxation,” Hershman said.
Under the proposal, counties would have the option to enact a variety of plans to cut the business personal property tax. Options include exempting the tax from businesses that acquire less than $20,000 in equipment a year or eliminating the tax on any new investments. The earliest those options could be enacted is 2015.
The plan also gives local governments the authority to offer a “super abatement” to exempt the tax for up to 20 years on new development.
Separately, the plan also cuts the corporate income tax and financial institutions tax to 4.9 percent over a six-year period.
While the compromise marks a step forward on the legislation, lawmakers sitting on a committee charged with crafting the final product will have to agree on the plan. Then it would go to the House and Senate for a final vote before heading to Gov. Mike Pence.
Senate President Pro Tem David Long (R-Fort Wayne) said he doesn’t fear the proposal will foster competition among Indiana’s counties because with the super abatement “everybody is in the game.”
He said the proposal also doesn’t cut revenue to local government unless the options are exercised.
“Their whole story heard throughout this session was if you cut, make us whole,” Long said. “Well, we haven’t cut anything. They get to do the cutting and that’s their complete decision.”
Long cautioned that while the tax plan is probably the closest to finality, it’s not a done deal and that there’s still some language where the House and Senate would need to come to an agreement.
In the waning days of the General Assembly session, lawmakers also are faced with coming to a conclusion on a potential pilot to provide public funding for pre-kindergarten and funding for roads.
While the General Assembly is required to adjourn by Friday, Republican legislative leaders have confirmed they are hoping the session will come to a close a day early.