Indiana House GOP cool on Pence's business tax cut

INDIANAPOLIS - Indiana lawmakers aren't jumping on board with Republican Gov. Mike Pence's proposal to eliminate property tax on business equipment, which collects about $1 billion a year for local governments and schools.

Republican House Speaker Brian Bosma on Wednesday offered a scaled-back version that would give counties the option of eliminating those taxes on new investments by existing companies in their communities or those moving in from out of state.

"It will give the opportunity and the incentive for employers who want to come here from Ohio or Michigan or Illinois or elsewhere to locate here," he said.

No estimate is being made on how much in tax savings that would mean for businesses -- and Bosma said nothing about steps to eliminate the tax as Pence outlined last month.

Bosma said the proposal will allow counties to compete for additional business investment while protecting local government revenues and gradually phasing out the tax.

"We believe this is the smart route and will give local counties the option to do what they know their community needs," he said.

Pence says the tax on equipment and machinery discourages companies from investing in new technology and expansions in Indiana. The governor has said he would try to find some way to offset any impact on local governments, but he hasn't offered any specifics.

The governor's office didn't immediately respond to a request for comment on the House plan.

Supporters of eliminating the tax -- including prominent groups such as the Indiana Chamber of Commerce and the Indiana Manufacturers Association -- say few states tax business equipment as much or more than Indiana.

Many local government leaders fear an elimination of the tax without a replacement source of revenue would lead to big cuts in vital services.

Some counties with numerous factories have high levels of property tax revenue coming from the business tax, such as more than 40 percent in southwestern Indiana's Gibson County and about 35 percent in central Indiana's Howard County. Largely rural Brown County in southern Indiana, however, has a level of about 3 percent.

House Minority Leader Scott Pelath, D-Michigan City, said the House Republican plan shows that they have "given up" on Pence's proposal for eliminating the tax. Pelath said the governor's plan would lead to increased taxes on homeowners and other residents -- and he hoped Bosma gets his way.

"It is significantly better than what the governor offered, which was basically a tax shift and a reduction in essential government services in return for the guarantee of not one single job," Pelath said.

Mayors and other local government leader across the state are worried about what would happen with the loss of the tax's revenue, said Matt Greller, executive director of the Indiana Association of Cities and Towns.

The House proposal of making the elimination optional is more acceptable, but still doesn't address the helping communities become more appealing places to live, Greller said.

"The more we slice the revenue side the less opportunity we have to create those kind of things which are just as big an economic development tool as reducing taxes," he said.

Also at the top of Bosma's legislative agenda is expanding preschool options for 1,000 low-income students through a voucher program.

"Indiana is one of only about 10 states that does not have some form of state-funded preschool program, and we're targeting the most vulnerable population," Bosma said.

Bosma would also like to increase funding for roads and give the Department of Transportation the authority to determine which projects are needed the most.

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