BY PATRICK GUINANE, Times of Northwest Indiana
pguinane@nwitimes.com
INDIANAPOLIS | State lawmakers embark Tuesday on what amounts to a nine-week hunt for property tax relief.
But instead of turning over couch cushions and rifling through car ashtrays, they'll be poking at paychecks, feeling out a sales tax increase and, perhaps, asking big industry to pony up.
"This session is going to be taxes, taxes, taxes," said state Rep. Ed Soliday, R-Valparaiso. "I think it will be intense."
Residential tax bills swelled an average of 24 percent this year, fueling protests and placing enormous pressure on the Indiana General Assembly to come up with an election-year salve during the legislative session that starts this week. But someone is going to have to pay for that tax relief, and one region legislator has his sights set on the steel mills.
Industry tax breaks eyed
State Rep. Charlie Brown, D-Gary, is sponsoring legislation to repeal a 2003 law that gave multimillion-dollar tax breaks to the lakefront mills and the BP Whiting Refinery at a time when the steel industry was on the skids.
Brown says recurring annual tax breaks -- originally estimated at $35 million a year -- look too generous in light of the lofty profits BP, ArcelorMittal and U.S. Steel now tally. At the very least, he suggests the 2003 law, House Bill 1858, should be scaled back during times when industry is thriving.
"I recognize that it's very cyclical. U.S. Steel may be in good shape today, but it may not be that way tomorrow," Brown said. "But I want to reinvigorate the discussion on (HB) 1858 and the breaks that industry has received."
It promises to be a heated discussion. U.S. Steel Corp. launched an opening salvo today, taking out full-page ads in The Times and Gary Post-Tribune. The company says repealing the tax breaks "would be a serious competitive blow to industries, like U.S. Steel, that are the mainstay of the local economy."
"Taxes are an important factor in determining where our company invests," the ad continues, "and even with HB 1858, Gary Works remains our most heavily taxed facility in the country."
Still, several Lake County officials, including Commissioner Roosevelt Allen Jr., D-Gary, argue industry isn't shouldering a fair share of the tax burden. And Brown's repeal effort appears to have some initial traction, at least in the Democrat-controlled House.
"It's highly possible that it will pass the House," said state Sen. Frank Mrvan, D-Hammond. "But when it gets to the Senate side, it's going to run into a brick wall."
Lake stands alone
Senate fiscal leaders, including Tax Chairman Luke Kenley, R-Noblesville, complain that Lake County already is stifling business growth with its high property taxes. And local officials didn't do themselves any favors by thumbing their noses at the local income tax legislators want Lake County to pass.
Lawmakers singled out Lake County last year, passing legislation that freezes most local government budgets until the county imposes a 1 percent income tax dedicated to property tax relief. Mrvan expects legislative leaders to demand Lake County pass the tax before its residents can take advantage of any statewide tax relief approved this session.
"I think it's going to be difficult to get any help from the legislature because the powers that be, especially on the Senate side, are saying we had the opportunity to help ourselves," Mrvan said. "They should be finding a way to punish the ... not the people."
Republican Gov. Mitch Daniels has presented lawmakers with a multifaceted tax relief plan that would shift child welfare and school operating costs to the state, lifting them off the backs of homeowners. The move would save property owners $46.5 million in Porter County, but the $61 million benefit earmarked for Lake County could be tied to the income tax standoff.
Raising the cash
The school and welfare swaps included in the governor's tax plan would cost about $1.1 billion, which is why he's asking for a penny sales tax hike, from 6 percent to 7 percent. That proposed increase, coupled with the Lake County income tax legislators are hungry for, could have some region residents questioning whether they can afford all the tax relief lawmakers are pondering.
Local government officials, especially in Lake County, will have to ask themselves the same question. New figures from the General Assembly's nonpartisan forecasting arm suggest the tax caps Daniels has proposed would force local government in Lake County to slash spending 27 percent in 2009. The Legislative Services Agency analysis says the governor's tax caps would force $264 million in cuts in Lake County and $10.6 million in Porter County.
Daniels wants to cap homeowner property taxes at 1 percent of assessed value, or $1,000 on a $100,000 home. Landlords would get a 2 percent cap, followed by 3 percent for businesses.