INDIANAPOLIS (AP/WANE) – Gov. Mike Pence told several Indiana mayors on Tuesday that he would consider using state dollars to offset any money they lose through a proposed cut in the state’s tax on business equipment.
The governor’s assurances that he would be “open” to sending state aid back to local government came as he continued trying to find a way to quietly navigate some level of business tax cuts through the General Assembly this session. Pence did not say where he would find the money if he approves the “replacement revenue” for local government.
Pence has made cutting the state’s tax on business equipment a priority this year, but he has left it to lawmakers to figure out details.
Senate Republicans want to cut the tax for small businesses with $25,000 or less worth of equipment, and cut the state’s corporate income tax from 6.5 percent to 4.9 percent. But House Republicans want to let counties decide whether the tax will be eliminated on new equipment purchases.
“After listening to local communities across our state, I have informed legislative leaders that I am open to full state replacement revenue for local governments to cover the cost of eliminating the business personal property tax on small businesses with less than $25,000 in equipment, as proposed in Senate Bill 1,” Pence said in a statement released Tuesday. “This would ensure that any reform of this tax does not unduly burden local governments or shift the cost of this tax onto hardworking Hoosiers.”
But the governor also said he continues to support the House plan.
Replacing the tax money lost through the Senate bill, without pushing the burden onto taxpayers at all, would require roughly $54 million in state dollars.
Angola Mayor Richard Hickman opposes the legislation.
“If this goes through, the governor’s tax decrease for business will become the governor’s tax increase on our citizens,” said Hickman, a Democrat.
Pence’s announcement came after an hour-long meeting with a group of mayors at his Statehouse office Tuesday afternoon.
Evansville Mayor Lloyd Winnecke said they were happy with the governor’s decision to support replacement revenue for any local cuts.
“We do still have grave concerns about House Bill 1001 and expressed those to the governor, but certainly his to being open to full state replacement relative to Senate Bill 1 is great news for communities all across Indiana,” said Winnecke, a Republican.
Broad-based concerns beyond the cuts to local government have arisen about cutting taxes statewide. Tax collections have waned in recent months and a dour economic forecast spurred Pence to cut agency budgets and higher education spending this past December as well as sell the state plane.
And a report released last week by the Indiana Fiscal Policy Institute, which tracks and analyzes state budget decisions, threw into question Pence’s claims that cutting the business tax would attract new businesses to the state or create new jobs.
The Legislative Services Agency released a report detailing losses to Indiana counties, including schools.
Allen County could lose tens-of-millions of dollars if the business tax is completely eliminated. The City of Fort Wayne could lose $12.5 million. Schools would also lose millions; Fort Wayne Community Schools could lost approximately $6 million. Southwest Allen County Schools would see a loss of $1.2 million. Northwest Allen County Schools would see a loss of $1.1 million from its budget and East Allen County Schools would lose approximately $624,000.
The Allen County Public Library could be out almost $2.1 million.
Government officials could raise taxes to make up the difference, but would be limited in the recovery amount because of tax caps.
The House and Senate plans are still winding their way through the General Assembly, which is scheduled to end work during its 2014 session on March 15.