POLITICS

Compromises near on Indiana biz tax cut, pre-kindergarten

Barb Berggoetz and Tony Cook
barb.berggoetz@indystar.com

Legislative leaders and the governor’s office have reached general agreements on bills cutting business taxes and offering a pre-kindergarten pilot program, but they’re not done deals yet.

Details still remain to be ironed out, and rank-and-file members in the House and Senate have yet to weigh in.

The two measures — priorities of Gov. Mike Pence — are among the top issues yet to be resolved by the General Assembly as it winds down this year’s legislative session. Leaders hope to finish their business by Thursday, a day ahead of schedule.

Progress also is being made on the Central Indiana mass transit bill and funding for state transportation programs, legislators report. But compromises on those issues are not as clear at this point.

Bosma said the business tax cut compromise focuses on giving counties the option of offering different types of businesses tax cuts. Originally, some of the proposals were not optional.

Also, Pence had proposed — and business lobbyists supported — phasing out all of business personal property taxes. But that met with strong resistance from local governments and schools. They stood to lose $1 billion in annual revenue if the tax was completely eliminated.

While the current plan makes any lost revenue optional, it’s no secret that the legislature’s actions this session represent the first step toward complete elimination of the equipment tax, said Matt Greller, executive director of the Indiana Association of Cities and Towns.

“I think this sets the stage for the real work to begin with the blue ribbon commission,” he said.

That commission, composed of lawmakers and various stakeholders, would study the issue this year and make recommendations to next year’s legislature.

The local option in this year’s measure wouldn’t even go into effect until July 2015, after next year’s legislative session.

Under the compromise business tax language, counties could eliminate business personal property tax for new equipment and let counties exempt small businesses with less than $20,000 worth of equipment from paying personal property taxes.

Counties also could offer so-called “super-abatement” on a project-by-project basis, which would allow select businesses to have property tax abatements extended to 20 years from the standard 10 years.

A reduction in corporate income tax by 2021 to 4.9 percent from 6.5 percent also remains in the bill. The rate would become the second lowest in the country.

Senate President Pro Tempore David Long said he thinks the bill would be a significant step, especially the corporate tax cut, which he says will pay dividends in the long run.

“In the big picture, that’s the most important one,” said Long, R-Fort Wayne. “When you lay state taxes, corporate taxes on top of the federal corporate tax, it’s a real deterrent to come to the United States in the first place. Indiana has done very well in attracting international business.”

Recognizing some people are still uncomfortable with the tax cuts, Bosma said delaying the effective date will give the legislature time to look at whether replacement revenues need to be adjusted and what they should be.

So is it is it hard to justify these additional business tax cuts on the heels of a February state revenue report that came in short of projections, continuing a trend since last July?

“No, not at all,” Bosma said.

He said the corporate income tax cut currently being phased in has resulted in increased corporate income tax collections because large corporations with multiple operations are flexible about where they do business and it’s attracting large employers as well.

Regarding the pre-kindergarten measure, House Bill 1004, Bosma said legislative leaders and Pence have agreed in principle to a five-county pilot program, along with the study commission on pre-K education issues requested by the Senate. He said the program would have 1,000 students or more.

“It still is subject to approval, but I’m feeling optimistic about it,” said Bosma. “Essentially, much of the discussion was kicked upstairs on these primary issues, with the governor at the table as well.”

Long, though, said Senate Republicans have a lot more to discuss about pre-kindergarten. “We haven’t finalized it. Until we do, it’s not a final deal,” he said.

The Senate has been concerned about committing to the cost of a pre-kindergarten pilot program and has offered spending modifications that are still being debated.

Long said the current proposal is “far less expensive for the state and a more reasonable and affordable pilot program than what was originally proposed.”

Sen. Luke Kenley, the Senate’s fiscal leader, said he’s trying to help work out a viable solution for funding the pilot program. But he added, “It’s questionable whether I’ll be able to vote for it (the bill).”

Debate continues on House Bill 176, the Central Indiana mass transit bill that would allow six counties to have voter referendums on whether to fund mass transit projects.

Rep. Jerry Torr, a Carmel Republican and the bill’s sponsor, said the compromise being worked out now rules out light rail and also would not allow a tax on business to support paying for the projects.

He said he believes the four legislators from the House and Senate who are negotiating a compromise are in agreement. If so, the bill would return to the full House and Senate for a final vote.

But Long said he couldn’t make any predictions the fate of mass transit. “They’re trying to find common ground, but they need to find common ground quickly.”

Call Star reporter Barb Berggoetz at (317) 444-6294. Follow her on Twitter: @barbberg.