ANDERSON — The much discussed Senate Bill 1, dealing with business personal property tax, passed the legislature this month.
Instead of cutting the tax or introducing a phase out plan, the Indiana General Assembly decided to allow county governments to choose whether or not they wanted to cut out the tax on small businesses and new equipment. The option would not be eligible for a vote until 2015.
The reason for cutting the tax was to continue to make Indiana more attractive to businesses. Not having a tax on machinery bought by a company is a good incentive to set up shop in the Hoosier state. The main opponents of the cut pointed out the tax generates about $1 billion in revenue used to fund local schools, governments and libraries. Without the revenue, the budgets of many of these entities could be gutted.
While the monetary impact or the decision the Madison County Council will make is unknown at this point, some entities like the town of Pendleton are worried about the ramifications the law could have.
Pendleton Town Council President Robert Jones said he understands why Gov. Mike Pence wants to make Indiana more attractive to businesses. But, he is also worried that no additional source of revenue for local entities has been created.
"Everyone wants to promote businesses," Jones said. "But at the same time we don't want to see that shortfall."
Jones said the council has not seen how much of an impact the tax cut would have but worried that any cut would be a bad thing.
"The big question becomes where do you make these cuts?" Jones said. "Where do you make up for that lost revenue?"
Jones said with any municipality such as Pendleton the biggest expense is public safety. Maintaining a police force and fire department isn't a cheap undertaking and Jones worries a cutoff of revenue could force towns to make cuts from key areas like public safety.
Alexandria Mayor Jack Woods said he doesn't think it should be up to locals to try and raise money for the town. He said local towns are still hurting from revenue they lost when the General Assembly put a cap on property taxes.
"They can't keep chopping away at the budget and expecting us to survive," Woods said. "We need another way to replace that money."
Woods said at a certain point the lack of funds could force them to cut back on city employees or public safety employees.
"That's not something a city should be focusing on," Woods said.
Rep. Terri Austin, D-Anderson, said she thought the impact of this tax cut should have been studied before it was rolled out as an option for counties. She said this tax could shift the majority of the tax burden over to taxpayers instead of businesses.
"We are already in the top 10 in the nation in terms of our business tax environment," Austin said. "We need to start focusing on other things like developing our workforce."
Jones acknowledges there is still a long way to go before anything is finalized but pointed out the law leaving the choice in the hands of county leaders could create competition between counties.
If, for instance, Delaware County decided to cut its tax, Madison County leaders might feel compelled to do the same.
Austin said once one county decides to cut the tax, all of the other counties will feel compelled to do the same.
"Essentially, it becomes a race to the bottom," Austin said.
County council member Robin Wagner didn't say what her opinion was of the proposed tax cut but said the council would have to weigh improving the business climate against the loss of funds for local entities.
"With the economy we need to look at all the possibilities to improve business in Madison County," Wagner said. "(But) we need to consider the impact on schools, cities and towns before even thinking about cutting any part of this tax out."