— Southwestern Indiana counties would require higher than average increases to local option income taxes in the scenario those funds are used as the sole replacement for a business tax Gov. Mike Pence wants to phase out.

On average, local income tax rates would need to increase by 0.77 percentage points to make up for the loss in revenue projected for local governments if Indiana eliminates the tax businesses pay on machinery and equipment.

Spencer County would see the largest increase in the state at 2.78 percent, with Gibson County needing the third highest at 2.40 percent.

Vanderburgh County’s rate would need to increase by an additional 0.83 percent, with Posey County at 1.90 percent.

Those numbers are found in a new report released by the nonpartisan Indiana Legislative Services Agency that shows the potential impact of eliminating the business personal property tax, without replacing the revenue to local governments and schools.

Gov. Mike Pence, who is pushing for the tax’s elimination, has said the state would phase out the tax in a way that it won’t “unduly” burden local governments. But Pence has not gone into detail on how the state will soften the hit in revenue — estimated to provide local governments about $1 billion in 2015, according to the report dated Dec. 23.

Pence noted a few options in presenting the idea to entrepreneurs in Indianapolis this month — such as allowing local counties to decide whether to phase out the tax — but did not offer a specific way to replace the revenue to local governments when speaking to reporters after the speech.

“I’m not talking about a tax cut,” Pence said. “I’m talking about tax reform, and with regard to making sure that tax reform does not unduly burden local governments, I think you can utilize time. You can utilize a growing economy. You can utilize other forms of taxation to capture the growth in the economy that will follow the right kind of tax reform to achieve that.”

Eliminating the tax, about 14 percent of the state’s property tax base, would cause homeowners and other real property owners to pay an additional $375 million absent replacement revenue, according to the report.

More properties would likely hit the state’s tax caps, forcing an approximate additional $556 million circuit breaker loss to local governments, according to the report.

Based on 2015 projections, Southwestern Indiana counties would lose an estimated $83 million in personal property tax revenue.

Vanderburgh County would lose $31 million, with Gibson County at $18 million. Posey County would lose $12.2 million in revenue with impacts to Warrick and Spencer counties at approximately $10 million and $11.8 million, respectively, the report states.

Association of Indiana Counties Executive Director David Bottorff said many counties do abatements of the personal property tax if the business promises job creation.

“You wouldn’t be able to dictate or require job creation as part of an elimination,” Bottorff said, “and for some companies personal property is really not an impediment to employment and locating to Indiana.”

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