By John Byrne, Post-Tribune staff writer
State Rep. Scott Pelath has targeted corporate tax abatements, which he says in many cases don't deliver the jobs and economic development they promise.
But special interests already are aiming to pull the bill's teeth, a provision that any tax abatement programs deemed ineffective be phased out at the end of 2009.
Pelath, D-Michigan City, knows he might not get the tough review of corporate tax breaks he set out to create with House Bill 1242.
"It's one of those bills where you're battling the whole hallway," Pelath said, referring to the crowds of corporate lobbyists who mill about in the halls outside the House and Senate chambers in the Statehouse, waiting to catch legislators' ears.
The bill cites five criteria on which corporate tax abatement programs should be evaluated: Job creation, actual or anticipated economic impact, minority employment opportunities, diversification of the workforce in a manner that reflects Indiana demographics and state and local revenues, including property taxes.
Pelath worries homeowners are picking up the tab, via higher residential property tax rates, for companies that have received tax incentives to settle in Indiana.
"With everything going on right now with property taxes, we have to really figure out whether these programs are delivering the goods," Pelath said.
It's an argument Jerome Prince has been making while on the Gary City Council.
Prince, the new member of the Lake County Council, worries the city has given away too much potential property tax revenue in recent years.
Abatement programs, through which businesses are given drastic property tax cuts over a number of years in exchange for locating in a community, have been increasingly used by Northwest Indiana municipalities as a way to lure jobs to the area.
But Pelath wonders whether local governments and residents are getting their money's worth.
Lower taxes for businesses equate to higher taxes for homeowners who must make up the shortfall in levies, Prince pointed out.
"In Gary, I don't believe we have gotten the best return from these abatements in recent years," Prince said.
Three percent property tax caps for businesses being proposed by Gov. Mitch Daniels would eliminate the need for many of the abatements, Prince said.
But Nate Feltman of the Indiana Economic Development Corp. said Pelath's bill could have a chilling effect on the state's ability to spur investment.
"We think it's a good thing that he has called attention to the need for review of these programs, but if we go out there and let the rest of the world know they could sunset at the end of 2009, businesses are going to look elsewhere when they are considering where to build," Feltman said.