State, Local Governments at Odds Over Tax

Jul 23, 2014

The State Capitol in Indianapolis.
Credit Courtesy / Wikimedia Commons

The next showdown between the state and local governments over the business personal property tax will be at a blue ribbon commission studying the issue this summer. 

The tax on is a levy on business equipment that generates a billion dollars a year for local governments.

Legislation passed this year allows local governments to either exempt new equipment from the business personal property tax, eliminate it on small businesses or abate the tax on specific projects for up to 20 years. 

It also created a study committee to examine the business personal property tax.  The commission is made up of lawmakers, business leaders and local government officials. 

Buck Creek Republican Senator Brandt Hershman, who chairs the commission, says it’s meant to dig into the details of tax policy, which he notes can be a complicated subject.

“We want to ensure that we’re achieving our job creation goals, preserving local revenue, and doing so in a way that’s fair to all taxpayers,” Hershman said.

A group of local government organizations – everyone from mayors, cities, towns, and counties to school corporations and public safety officials – has been leading the fight against cutting the tax without providing money to make up for the lost revenue.  They call themselves the Replace Don’t Erase coalition. 

Indiana Association of Cities and Towns executive director Matt Greller, who helps lead the coalition, says he’s hopeful the commission will make meaningful suggestions about possible replacement revenue for local governments.

“And replace it so that in four, five, ten, 15 years, whatever that replacement revenue isn’t taken away in the next budget shortfall, the next down economy,” Greller said.

Hershman suggests that replacing revenue can be made up in part by making government more efficient.  But many local government leaders say they’ve already slashed their budgets to the bone and can’t afford to lose another revenue stream.