Indiana Business Tax Cut Clears Key Hurdle

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CHICAGO -- An Indiana legislative panel Tuesday approved a bill that would cut the state's corporate and business taxes as part of an effort by Gov. Mike Pence to attract more businesses to the Hoosier State.

The Senate Tax and Fiscal Policy Committee approved the measure 7-2 after a three-hour hearing.

Legislators compared the bill to a 2009 overhaul of the state's property tax system.

"It's hard to overstate the value [of this bill] as we work these last six to eight years to develop a really good tax structure here in Indiana," Sen. Luke Kenley, R-Noblesville, who is also the chair of the appropriations committee, said during the hearing. "I'm as excited about this bill as any bill since the property tax reform."

Senate Bill 1 is a revision of an earlier proposal that sparked major opposition from local government officials, who warned it would mean devastating declines in revenue.

The Senate bill eliminates the business equipment tax for businesses with less than $25,000 worth of equipment. That would mean the loss of roughly $25 million of annual revenue that goes to local governments.

An initial proposal, supported by Pence and still under consideration in the House, would eliminate the tax entirely. That would mean the loss to local governments of about $1 billion annually. Some cities that host major manufacturers and businesses would face losses of up to 70% of their general fund revenue.

The Senate bill would set up a committee to study the elimination proposal.

"This is the most reasonable bill we've seen so far," David Bottorff, executive director of the Association of Indiana Counties, told lawmakers.

"The concern that we have is that this is the first step toward complete elimination, and there's no replacement money in this bill," he said. "The concern is that it sets a precedent going forward, to absorb a little bit now, and a little bit next year, until it's up to $1 billion."

The bill would trim the corporate income tax rate to 4.9% from 6.5% by 2019. That would mean the loss of $132 million in annual revenue. The measure would replace some of that revenue by cutting tax credits for research and development for colleges and universities.

The bill will next go to the full Senate.

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