Governor Mike Pence’s proposal to phase out the business personal property tax continues to get a chilly reception from local officials and state lawmakers. They fear that it will shift the tax burden from business to individuals.
The governor says that doesn’t have to be the case.
If local option income taxes are used to replace lost business taxes, those income taxes will go up by as much as two percentage points in some counties.
The governor spoke at a Boy Scout luncheon Monday and, afterward, he wanted to make it clear that he’s earned a merit badge of sorts when it comes to helping out individual taxpayers..
“I think you know that I just fought to lower income taxes in Indiana,” he said in reference to a cut in the state income tax passed earlier this year.
The reminder is necessary because the Chamber of Commerce suggests that local income taxes are the best way to pay for the phase out of the tax on business equipment that the governor called for.
Key lawmakers are opposed to the idea of cutting a state tax only to raise local taxes. “We don’t want to set that scenario up where pit each other, the locals against the state officials,” said Rep. Tim Brown (R-Crawfordsville.)
John Ketzenberger of the Indiana Fiscal Policy Institute will produce a study of options next month but he’s already reached one conclusion. “If it would be a different type of tax on business that would allow (state officials) to remain competitive in attracting new busienss to the state but offset the loss of revenue to local government,” said Ketzenberger, “I think it would get a more favorable reception in the General Assembly.”
The governor is hearing from mayors who have no desire to raise local taxes. “I’ve made it very clear to them,” said Pence, “that we are talking about tax reform, not specifically tax reduction.”
Nevertheless, Mike Pence is not yet saying where he thinks the money should come from. The governor says he will provide more specifics as time goes on.
But he suggested that it may be up to state lawmakers to determine both the timing of the business personal property tax phase out, and the source of replacement funds.