By Jacie Shoaf
TheStatehouseFile.com

INDIANAPOLIS – Tourism and travel is the state’s sixth largest industry, not including government, according to a new economic impact report released Wednesday by Lt. Gov. Sue Ellspermann and the Indiana Office of Tourism Development.

The industry maintains nearly 140,000 jobs and contributes $10 billion in revenue to Indiana businesses, the report said.

“This economic impact study confirms the fact that the travel, tourism and hospitality industry is a crucial segment of the Indiana economy,” Ellspermann said. “My office is committed to promoting Indiana tourism and providing support to our partners in the industry.”

The study reveals that in 2012, the travel, tourism and hospitality industry constituted roughly 1.5 percent of Indiana’s total gross domestic product, 4.8 percent of total jobs and 6.3 percent of state and local tax receipts.

The study took into account Super Bowl XLVI, which was responsible for roughly half of the industry’s 5.2 percent growth in 2012.

In addition, the study finds that tourism pays direct wages of more than $3 billion to full and part-time industry employees and that Indiana retains approximately 76 percent of each dollar spent by visitors.

Furthermore, 40 Indiana counties chose to invest in a research cooperative that provided them county-specific reports to document the impact of tourism at the local level.

The study, which defines tourism as an overnight stay or a trip greater than 50 miles each way that is not part of an individual’s normal routine, is the first study of its kind to be produced in eight years. It will help measure future developments in the travel, tourism and hospitality industry.

“This report illustrates the economic benefit Indiana derives from tourism and is the first such report in some time,” said Mark Newman, the tourism department’s executive director. “It serves as a necessary benchmark to begin measuring the growth or decline of tourism as an economic driver for the state on a more regular basis.”

The study was commissioned by tourism officials and conducted by Rockport Analytics, with managing director and chief economist Ken McGill acting as head of the research team. Rockport Analytics is an independent market research and consulting company that specializes in various studies for the travel, tourism and hospitality industry.

“Our research shows Indiana earns a significant positive return from a minimal investment in the tourism industry,” McGill said. “The data demonstrates that Indiana has the potential to develop even greater economic development returns through a robust tourism economy.”

The study used data on Indiana visitor spending derived from multiple sources, including Longwoods International, Reach Market Planning and U.S. Office of Travel & Tourism Industries. The data was reconciled with information from the Bureau of Labor Statistics the Indiana Department of Revenue regarding employment and tax receipts, as well as secondary sources such as Smith Travel Research.

Jacie Shoaf is a reporter for TheStatehouseFile.com, a news website powered by Franklin College journalism students.

By Lesley Weidenbener
TheStatehouseFile.com

INDIANAPOLIS – Gov. Mike Pence’s plan to eliminate the tax on business equipment would mean significantly higher taxes for other property owners if the state took no specific action to protect them, according to a new analysis.

Read the LSA report

The proposal would also mean big losses for local governments – unless another tax was created or increased to make up for the revenue.

And to do so with the individual income tax would mean a statewide average increase of more than three-quarters of a percent, according to the report from the nonpartisan Legislative Services Agency.

That could mean an additional $577 a year for a family with taxable income of $75,000. And for residents of the state’s more manufacturing-heavy counties, the amount would be substantially higher – as much as three times more.

Interactive map
Click the map below to see how large of an income tax increase would be needed in each county to replace the personal property tax.

“It all depends on the mix of the properties you have that you’re able to tax,” said David Bottorff, executive director of the Association of Indiana Counties.

“Ironically, it’s the communities that in general have been the economic hubs that are hurt the most – Howard County, Spencer, Gibson, Lake – the counties that have a lot of job creation and they rely on the personal property tax to help hold down everybody’s taxes,” Bottorff said. If the personal property tax is eliminated, “those are the ones that pick up the biggest shifts and the losses. It’s really a statewide issue but those are the communities that have the most to lose.”

The personal property tax is imposed on equipment used by businesses. Personal property can be a photographer’s camera or an automaker’s metal stamping machine or a newspaper’s printing press and it makes up about 14.5 percent of the state’s taxable property value.

Currently, the tax generates nearly $1.1 billion for cities, counties, schools, libraries and other local governments, according to the Legislative Services Agency report.

But Pence says it’s an impediment to business development and so he wants to dump it, a proposal that’s been backed for years by the Indiana Chamber of Commerce.

The tax “discourages companies from investing in new technology and the expansion of their businesses,” Pence said in a speech this month. “As the most manufacturing-intensive state in the nation, we are holding back new capital investment because of our business personal property tax.”

However, Pence has not said how – or if – he will back replacement revenue for local governments. He says he’ll leave that decision to the General Assembly.

And his office had no comment on the new report. His press secretary, Kara Brooks, said, “Our policy team has not seen the report yet and this is the first I’ve seen of it as well.”

The report, which was released Monday, provides a peek into some of the options, although it advocates no position.

The report found that:

Eliminating the personal property tax without other changes would shift costs to other property owners.

That’s because local governments establish levies – which represent the total they aim to collect – and then that amount is split among taxpayers. If one group – such as those that own business equipment – is eliminated, then others pay more.

LSA estimates the shift in this case could mean the owners of so-called real property – which includes homes, buildings and land – would pay about $375 million more annually. Homeowners would be the largest single class of property owners to pay more.

The total shift would be higher but the state has limited property tax bills. So as tax bills increase, more property owners would hit the cap, reducing revenue to local governments.

Replacing revenue with income taxes would mean significantly higher rates in some counties.

Pence has not advocated any way to replace revenue lost if the personal property tax is eliminated, but in similar situations, policy makers have turned to the local income tax as a makeup option.

The LSA report finds that to fully replace the lost revenue, counties would need to boost their income tax rates by an average of 0.77 percentage points – but the amount varies widely.

In Brown County, it would take an income tax increase of just .10 percentage points (about $75 a year for a family with income of $75,000) compared to a 2.78 percentage point increase in Spencer County (an increase of $2,085 for the same family).

The combination of tax caps and the elimination of the personal property tax means local government would lose about $554 million annually.

Without other changes or replacement revenue, cities and towns would be hit hardest by the elimination of the personal property tax, with about $175 million in total losses, according to the report.

Schools would also be big losers – about $151 million.

Additionally, tax increment finance districts – often calls TIFs – would lose significant revenue. Those districts are set up to capture tax revenue to use for special projects, usually to pay off bonds associated with construction or infrastructure improvements.

Pence has said repeatedly that he doesn’t want to “unduly” burden local governments. And he’s proposed a phase-out of the tax so the impact doesn’t hit at once.

“We will work to empower communities and local governments in this process,” Pence said. “Time and economic growth should be our friends here, making it possible to phase out the tax while protecting local governments.”

But key fiscal leaders – including Senate Appropriations Chairman Luke Kenley, R-Noblesville – have said there are significant issues lawmakers must tackle. Among them is how to make up the revenue – and who should do so.

Kenley said a key decision is whether businesses that are benefitting from the elimination of the personal property tax should be the ones who pay, rather than shifting the burden to individuals.

That could require creating a new tax, something the LSA report doesn’t address.

Lesley Weidenbener is executive editor of TheStatehouseFile.com, a news website powered by Franklin College journalism students.