Indiana News

Analyst: Hold Off On Ditching Business Personal Property Tax

Ketzenberger: state's fiscal situation is too uncertain to make change


Governor Mike Pence ( file photo)

Governor Pence wants to do away with what he calls an anti-competitive tax, but one analyst says now may not be the time to mess with the state's revenue structure.

Listen to Ray's interview with John Ketzenberger, Indiana Fiscal Policy Institute:

The governor wants to do away with Indiana's Business Personal Property Tax, the tax levied on personal equipment that business owners use in the course of doing work for their companies. Pence says Illinois and Ohio don't have the tax, and Michigan is phasing theirs out, and suggests Indiana could be at a disadvantage when it comes to recruiting companies to the state. But Pence made the proposal just days before he ordered across-the-board budget cuts for state agencies after tax revenue in November was lower than had been projected. "I guess I'm arguing that it's time to maybe step back and take a look at our tax and budget policy, and then wait and see what makes sense for the economy long-term," said John Ketzenberger, president of the Indiana Fiscal Policy Institute.

State tax collections are now $141 million below what was projected for the first five months of the budget year, and Ketzenberger says much of that has to do with the economy. "Indiana is heavily reliant on sales and income tax. More than 80-percent of the revenue the state collects comes from those two sources," another reason, Ketzenberger says, to wait on making any changes to the tax code.

Pence hasn't offered many specifics as to how the revenue from the tax would be replaced, saying he'd like to hear ideas from lawmakers. Ketzenberger says that's an important question for local governments, who collect business personal property tax revenue. Some of those governments say roughly $500 million in local revenue would disappear if the tax weren't in place, and Ketzenberger says many businesses aren't paying the tax to begin with. "(Local governments), in their own efforts to recruit jobs, will abate the business personal property tax and make that part of the package a prospective employer will get if they move in," Ketzenberger said.

The governor says he also believes economic growth generated by new jobs created by getting rid of the tax would make up for some of the lost revenue.



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