FORT WAYNE — A study conducted for the Regional Chamber of Northeast Indiana indicates eliminating the personal property tax on Hoosier businesses could cause stress on local government budgets in the 10-county northeast Indiana region.
The Regional Chamber urges lawmakers to review the study and fully understand the potential impact of changing tax laws as they work to make Indiana more attractive to new business.
Unlike some Midwestern states, Indiana businesses now pay property taxes on all machines, computers, furniture and equipment they use. Discussion on the impact of eliminating personal property taxes is on the agenda of the Commission on State Tax and Financing Policy on Thursday. Proposals to repeal the personal property tax have been introduced in the past and likely will be deliberated during the 2013 legislative session, a news release from the Regional Chamber said.
The study commissioned by the Regional Chamber found eliminating the business personal property tax would affect each of the area’s 10 counties differently because of broad variations in total business personal property tax assessments.
The study projects Allen County governments could lose up to 8.8 percent of their tax revenue. The city of Fort Wayne has the largest projected loss at $9.4 million dollars.
Steuben County would see the smallest impact, losing 1.7 percent of property tax dollars.
The average impact across the 10-county northeast Indiana region is a loss of 7.3 percent of tax revenues. DeKalb County government would lose 7.6 percent of its tax dollars, Noble would lose 7.2 percent and LaGrange would lose 5.3 percent, the study said.
Ken McCrory, executive director of the DeKalb County Economic Development Partnership, said a possible elimination of the business personal property tax could greatly dampen the ability of his county to function. Of the 10-county area, DeKalb County has the highest percentage of business personal property at 22.6 percent of its total assessed valuation .
“Last week when this was brought up,” McCrory said, referring to a meeting of economic development directors, “we suspected that the counties would receive less in taxes to operate their government.”
Dave Koenig, executive director of the Steuben County Economic Development Corp., said the study shows Steuben County’s dependence on high-value lake property to carry the weight of the tax burden. In the 10-county area, Steuben County has the lowest amount of business personal property in its total assessed valuation at 5.2 percent.
“The SCEDC would like to see that percentage grow from the current 5.2 percent, and that is exactly what $500 million in new capital investment over the next five years would do, help level the tax liability away from our dependence on residential,” Koenig said.
Regional Chamber Executive Director John Gerni said this study details the impact of reduced tax revenue on local units of government in the region if such a proposal was enacted.
“The study demonstrates that if the business personal property tax is eliminated in total, it would have a material impact on local government finance in many jurisdictions,” Gerni said. “The Regional Chamber is an advocate for public policy that promotes a favorable business climate in northeast Indiana and supports efforts to make Indiana more competitive from an economic development perspective.”
Businesses have suggested that a repeal of personal property taxes would benefit economic development efforts and allow Indiana to compete with surrounding states that do not collect such a tax.
Gerni noted that Indiana has a favorable business tax environment and said the Regional Chamber is open to any proposal that would enhance economic growth in the region. He added that “Indiana ranks first in the Midwest and 11th nationally in the Tax Foundations’s Business Tax Climate Index.”
Gerni made it clear that the Regional Chamber intends to be involved in the discussion and seek a solution that will enhance economic development for northeast Indiana.
“There could be a number of ways of threading the needle to make Indiana more competitive without squeezing local governments,” Gerni said. “Our role is to encourage discussion on the issue and then engage in finding a solution that attracts investment, and yet allows governments to deliver services in an efficient manner.”
Keith Gillenwater, president and CEO of the LaGrange County Economic Development Corp., echoed that sentiment.
“I have found our local governments are good stewards of the money they are entrusted with. While we applaud efforts to make our local business climate more ‘business friendly’ for economic development efforts, I personally feel that eliminating this revenue stream for local governments would be very difficult to overcome, particularly if there is no way to replace that revenue,” Gillenwater said. “We sincerely appreciate the Regional Chamber undertaking this study and releasing it for public discourse. This is important to understand, as while it sounds good to cut/reduce taxes, there are at the end of the day very real effects from that type of action.”
The study was prepared by Larry DeBoer, professor of agricultural economics at Purdue University, and the Community Research Institute at Indiana University-Purdue University Fort Wayne. A full version of the study is available for download at the Regional Chamber’s website, neinadvocates.com.
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