Key Indiana lawmakers divided on more business tax cuts

State Sen. Brandt Hershman, R-Buck Creek, believes there's plenty of room to drop the state's business tax rates, even after multiple conservative tax experts told the Legislature's Hershman-led business tax study commission Monday that Indiana already is among the best states in the nation for low business taxes.

"We've made great strides in making Indiana more competitive for business development and job growth in recent years, and we want to continue to ensure we have one of the most attractive business development climates in the U.S.," Hershman said.

Hershman was lead sponsor this year of Senate Enrolled Act 1, reducing Indiana's corporate income tax rate to 4.9 percent from 7 percent by 2021, and giving counties the option of reducing or eliminating some business personal property taxes.

He is optimistic the study committee, which is set to meet again Sept. 29 and once in October, will reach a consensus on a mandatory reduction or elimination of the business personal property tax for the full General Assembly to consider next year.

"I think there may be some relief available to businesses," Hershman said. "We just need to ensure that it's targeted and that we can pay for it."

The business personal property tax is an annual charge based on the value of a company's business and manufacturing equipment that provides more than $1 billion a year to schools and local governments.

Republican Gov. Mike Pence last year called for statewide elimination of the tax, but settled for a local option after the Republican-controlled Legislature failed to agree on how to replace the lost revenue.

State Sen. Luke Kenley, R-Noblesville, chairman of the budget-writing Senate Appropriations Committee, is skeptical Hershman can devise a revenue-neutral business personal property tax cut or phase-out.

"I think the focus needs to be on the overall tax system and the implication for all taxpayers," Kenley said. "I don't think you can just deal only with, for example, the business personal property tax in this commission and really get your work done."

He said lawmakers would be better off waiting a few years and seeing how many counties eliminate their business personal property tax before the Legislature tackles the subject again.

"It's a struggle for us to just cut taxes without considering, for example, on the spending side, are there programs that you need to eliminate," Kenley asked. "I think we're in a sweet spot right now. I don't know that we can do more without resetting our priorities."

Pence already has hinted that the two-year budget he'll present to lawmakers in December will include cuts to state programs. He hasn't said whether those reductions will pay for new spending or more tax cuts.