TERRE HAUTE — Vigo County could see a more than $3.2-million reduction in revenue for its general fund if the Indiana General Assembly eliminates the business personal property tax.
Some legislators have indicated their intention to do just that when the next session takes up in January. They will have the backing of Republican Gov. Mike Pence, who reiterated to media on Friday his desire to phase out the tax.
While state leaders say they would seek substitute funding to replace revenues for local governments, few specifics have emerged, something that worries local officials.
“Eventually, this means a reduction in services, which is the only place to cut. That means public safety and county employees,” said Vigo County Auditor Tim Seprodi in response to the “what if the tax goes away” scenario. “We would have to reduce the workforce. There are only so many places that you can cut pencils and paper …”
Republicans say the plan to reduce or eliminate the tax is meant to help attract new business investment in Indiana. Local officials from around the state have been vocal in their opposition to the proposal, contending the fiscal impact to schools, libraries and local government would be disastrous.
For Vigo County, elimination of the tax money would equate to a 10-15 percent reduction in workers, including fewer correctional officers at the county jail, Seprodi said. Vigo County road deputies are funded from the County Adjusted Gross Income Tax and would not be affected.
Not the case for the town of West Terre Haute.
“What would take the biggest hit is the police department, which makes up three-quarters of our general fund,” said Scott McClain, president of the town board.
“Laying off police officers is the last thing we want to do,” McClain said of the town’s six full-time officers and one part-timer. The town also has a clerk.
“The unfortunate thing is people here will lose services, but it’s the only choice that we would have to make if the money is not there,” he said.
West Terre Haute’s revenue reduction would be $42,091, while the town of Seelyville would see $17,374 less; the town of Riley would lose $3,326.
Harrison Township, located within the city limits of Terre Haute, could see a 16-percent cut in revenue. Yet, the township clerk and bookkeeper, Monica Van Hook, told the Tribune-Star that the number of staff would be cut before any services. The township has five full-time investigators, a supervisor who is also an investigator, the elected township trustee and township clerk. Townships provide financial assistance to help pay electrical and heating bills, as well as rent and medical expenses.
Harrison Township would lose $179,900 in revenue if the business personal property tax is eliminated.
“That would be a big hit,” Van Hook said. “Obviously, we would cut staff before the level of assistance that we give. It would still be pretty disastrous for some of the people in the township who are out of work, especially in the winter months, as we help with electric and heating bills.”
The largest portion of the township’s budget is for direct assistance, which includes medical and prescription assistance, indigent burial, shelter, food, household assistance and utilities. Last year, that tallied $372,898.
“We have already spent over $188,000 so far this year” on electrical and heating assistance, Van Hook said.
Auditor Seprodi said Vigo County would see a nearly 16-percent reduction in revenue, but that figure pales in comparison to the 26-percent revenue shortfall estimated by the Legislative Services Agency, which informs the Indiana General Assembly on fiscal impact of proposed legislation.
Seprodi believes, however, that the LSA estimate assumes a 100-percent tax collection and overstates Vigo County’s net personal property tax income by $10 million.
Whatever the total in funding cuts, they would be felt by county agencies, including the public library.
“We’re keeping an eye on this. However, until we know a little bit more, it is all projections,” said Kristi Howe, director of the Vigo County Public Library. The library’s revenue could drop by $636,475 if the tax is eliminated.
“It would certainly be a challenge for us to absorb that type of loss on top of our circuit breaker challenges,” Howe said of property tax caps that have reduced revenue to local government.
“It would be significant for us,” Howe said. “Something of that magnitude is not something that you can make up in trimming here and there. We would have to look at the array of library services being offered and identify those that are most essential and go from there.
“Right now, we are all kind of in a wait and see mode,” she said.
Seprodi, an elected Democrat, doesn’t mince words. The idea of eliminating the business tax should be off the table.
“I am against removing this. As far as I am concerned, if the intention of the state Legislature is dissolve local government, this is a great step toward that,” Seprodi said. “This would result in possibly an increase to income tax and increase in sales tax, because there has to be some way to replace this revenue loss.
“And if it comes back to income or sales tax to do that,” he said, “we, as individuals, will be paying for this, not business.”
While states surrounding Indiana don’t have a personal property tax for businesses, those states do have higher individual income tax rates than Indiana, said the county auditor.
“Hoosiers have helped business,” Seprodi said. “Yet, there has been no big influx of companies after passing right-to-work, after cutting the business inventory tax and corporate income tax.”
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