By Lesley Weidenbener
TheStatehouseFile.com
INDIANAPOLIS – About half of all Indiana companies would stop paying property taxes on the value of their equipment under a recommendation a legislative study committee made Wednesday.
The group’s chairman – Sen. Brandt Hershman, R-Buck Creek – said those firms might be required to pay a modest fee to help make up revenue lost to local governments. However, the latter was not among the 18 recommendations approved by the Commission on Business Personal Property and Business Taxation.
Hershman called the commission’s recommendations “aspirational†and said the group’s final report will serve as a “guidance document†the legislature could implement over time.
But the Republican, who chairs the Senate Tax & Fiscal Policy Committee, said he’d like to move forward with the small business property tax cut when lawmakers reconvene in January. The proposal would exempt taxpayers that have less than $20,000 in equipment.
Under a law passed earlier this year, counties have the option of eliminating the tax for those companies. But the personal property tax commission voted Wednesday to recommend that the change become mandatory for taxes paid in 2017.
Most of the 147,000 companies that would be affected pay less than $50 per year, said Kevin Brinegar, president of the Indiana Chamber of Commerce and a member of the commission. But he said they often spend much more to have their equipment assessed and tax returns prepared.
He called the proposal a “common sense recommendation.â€
Still, the change would not come without costs to local governments and schools that rely on the revenue.
According to a fiscal analysis prepared by the Legislative Services Agency, the tax cut would save Hoosier small businesses about $13.5 million a year. But because of the way the change would shift tax burdens to other property owners – and move some of those taxpayers up to constitutional limits on their bills – local governments would lose less than that. LSA estimates the total be about $6.8 million per year, with cities, towns and schools hit hardest.
The commission did not propose specific ways to help local governments weather the cuts. But it did approve a general recommendation that called for continued discussions about ways to “mitigate any lost revenues realized by local units†of government.
Terre Haute Mayor Duke Bennett, a member of the commission, said his city has been hit hard by other property tax changes and would likely suffer losses under the new proposal. Still, he voted for the commission recommendations, in part because they call for additional conversations about new revenue sources.
“I just want to make sure we continue to keep that in front of us,†Bennett said.
After the meeting, Hershman said he would consider legislation that imposed a $25 or $50 fee on companies that are freed from paying property taxes on business equipment. He said that would be easier and cheaper for the firms because they would not need to pay for professional help to assess their equipment and prepare their returns. And he said it would relieve administrative burdens for local governments that have to process the returns as well.
It “would probably be a win-win for everyone involved,†Hershman said. But “we didn’t adopt that as a recommendation because we still have some due diligence and research to do it on that.â€
The commission also recommended Wednesday that the legislature:
Postpone changes – again – in the way agricultural land is assessed for taxation. The recommendation says that the state should use the same base assessments for farmland in 2015 as it did this year and should use so-called soil productivity figures that have been used since 2011. Otherwise, taxes on farmers are expected to increase. The committee said the state should also look for alternative ways to assessing agricultural property.
Consolidate several existing local income tax rates into a single rate that could be used in part to reduce property tax rates and pay for debt and special projects.
Remove the requirement that local governments use local income taxes in part to reduce property taxes in order to have permission to use those rates to fund public safety.
Change a sales tax exemption for manufacturing and agricultural production so that companies don’t have to pay the tax if the product is used directly in the overall production process. Currently it must be used in the direct production of a product to qualify.
Lesley Weidenbener is executive editor of TheStatehouseFile.com, a news website powered by Franklin College journalism students.
Well, I read the headline with great anticipation, but how small is small to have only $20,000 in equipment and pay only $50 a year? I’m a frugal mom and pop business and have purchased over $50,000 in equipment this year. Any time I hear fee and modest from the government, and immodest image comes to my mind.
I’m at lost with the state chamber of commerce claim the burden of taxing of personal equipment. Was there a burden when the equipment was claimed for depreciation purposes on tax returns?
Changing the tax exemption will create a slippery slope which can be abused to the upmost!
Past 25 years I have seen a big swing in taxes reduced/eliminated of business and saddled on the average Joe!
Yes, depreciation was taken on their tax returns, but, what about the wages earned by those who manufactured the equipment, those, like Cat..in Peoria, IL….taxes should be assessed based on the ability to pay…for instances, Income, instead of capital…which comes first, the capital or the jobs…before Toyota was built, there were no signs in front of the corn field saying “Now Hiring”….now, in front of the plant, it says it….so, when government taxes capital (Equipment) it taxes the job you are looking for….
The Germans have it right…they do not have capital gains taxes (Tax on Jobs) but, they have a much higher income tax rate, (Tax on the Income Capital produces) creating more need for jobs to operate the capital…
Why do we have property taxes in the first place…it is a 19th century notion that people with wealth owed land, forty acres and a goat theory…it was before the legalization of income taxes…so, now we have retirees and folks looking for work, but we still property tax them….no consideration given to the ability to pay…so, it equipment property taxes are eliminated, more prospects for jobs…TAX THE INCOME CAPITAL PRODUCES AND LAY OFF TAXING THE CAPITAL..
Well said MM. As I stated, the end user pays the taxes with margin added. I think the government forces businesses to become the tax collector to hide the true cost of taxes from Armstrong’s average Joe.
When said business as yours, what difference is there for average Joe to pay (so called hidden) taxes when all said employers whom makes that certain product, must abide equally?
IE, don’t underestimate that average Joe. He is not that fictional plumber Joe of your and Sarah Palins!
As for a true cost. I am still trying beat into my son’s head that a $20 item is not a hour worth of work when making $20 hr! Once taxes and expense are deducted to live for that week. That $20 may had been the only profit after expense for that eight hour day!
Armstrongs, You’re missing my points. All business, large or small. must either pass on the cost of taxes to the average Joe or absorb the cost. Same with income tax. When you calculate the rate of your billable hour, you must add the taxes on wages to that cost and with your profit margin That cost is then passed on to the average Armstrongres. These cost are hidden from you on the retail shelf.
If your son’s $20 an hour is take home pay, then the taxes have already been paid until he purchases something, but he also had to generate enough income pay for the associated cost. An employer can only recoup additional cost at the rate of his profit margin. For example, if a business has a 10% margin, the company must first generate $9 to cover a $1 increase in cost. That’s why I say a modest fee brings immodest images to my mind.
IE, respectably, your missing my points by a wider margin the I’m accused by you! My points have tried to stay with topic on hand which is property taxes on $20,000 worth of equipment or less. Your points are tangent to the original topic! I understand that the employer also pays their part of the Social Security on each employee. Never denied any of that what was off topic. By adding “paid cost” to that product before your markup percentage can put that extra jingle in your pocket!
Hidden tax cost? Really? Is your “actual” cost to your service or product listed on those goods? Is your “”mark up” listed on your service or product? “Hidden” is irreverent.
You were in “left field” about the $20 a hr pay. Please reread my post! I was speaking of his wages only and what he buys. Not on employers part of billable hrs, blah blah…..
Lets do it this way! You received $20 for that widget that you made and sold. Do you think by selling 1000 of these widgets you can buy $20,000 worth of equipment? No, once all expense is deducted there maybe, say a $2 profit per piece. You must build and sell 10,000 widgets to buy that equipment. That is what I was saying about my son, once all of weekly expense is paid, he may only have $100 left to show for those 40 hrs worked. This translate to working 8 hrs for that $20 non essential item!
Please respond to my 11:14 post! Thanks!
I see where you did!
The reference to Germany taxes, All I had to see was the “tax havens” percentages multiplying past 15 years and the bottom drop out on corporations taxes from 1995 to 2009.
Yes, workers do pay taxes with their wages. What the he** does that have to do with topic of tax on less then $20,000 equipment?
If Germany is your envy, it is only about a 12 hour flight away!
Arms, an employee does not pay all the taxes or the expenses associated with his wages. Never the less, the end user pays these expenses with higher prices.
It’s always saddled on the average Joe. Any tax burden is passed on to the consumer with margin added. And of course part of that burden also includes the expense of making the employer the tax collector. A whole industry exist just to deal with taxes and all to often decisions made are based on tax considerations rather than growth. I have a very simple plan for tax reform. Make each person write their own checks for taxes incurred. Do that for a year, and you will see real tax reform not tax shifting, AKA modest fees.
One reason I don’t grow my business faster is because the risk is not greater than the reward. My tax liabilities do not change when profitability declines. In fact the stake in the heart of most small businesses is that they can not pay the taxes and become delinquent. It is a descending spiral from which escape is nearly impossible.
Question IE!
When tax burden is shift from producer to the consumer as mention above. The consumer pays the extra tax that is passed on, the products price stay’s the same as before, and the producers profits increased! All correct?
No, not correct. It might be true in the short term, but in a free market competition will drive the price down or stall increases. But what is wrong with profits? Profit is a good thing for everyone. It shows up in your retirement and investments and helps businesses to grow.
IE, no problem with profits. As I had said in the past, when my employer made money ,I made money. It takes both parties!
The “ill” is when you place the tax burden onto someone else and your profit is at their added expense!
I agree. Sounds like mostly posturing air by the senator from Buck Creek. Could make failing cities like Winnecke’s Evansville ever more dependent on gambling revenues.
Another good transportation logistics reason to locate your global start-up, nearby, however, outside Vanderburgh county lines, maybe even south of the river.
“more: nam pecuniam crepitus”
Point well taken….
I expect Pence to try to do to Indiana what Brownback has done to Kansas.
I hope like the he** he doesn’t! But he does have those “Marching Orders” from the state chamber of commerce he must abide by!
Why come to Evansville? Top three highest utility rates in the country, semi-skilled work force at best, local leadership hell bent to spend ourselves into prosperity, as least, according to Scheafer’s absurd comment, organized labor that controls our boards together with the crony capitalists. Check out Owensboro and you will see why they have a leg up….things get done because the lack of “the shake down” given to outside developers?…maybe this is why people like Mosby have been given their apparent marching orders to oppose Robinson’s ordinance….so, keep looking at the so-called Wizard, ignoring the person behind the sheet!
Of course, the people of our community should review the article written about Evansville years ago, can’t recall the name, but, do remember the subject matter; “Don’t consider coming to Evansville” Labor issues and cronyism…
May want to see where all that money came from locally. A person that lives in that area had told couple years back their taxes have really expanded over these past ten years for that shiny stuff downtown! Have no data to back this.
While building the Owensboro hospital is said to had bus loads of non-English speaking workforce that scattered when a Federal agency shown up. Second hand information!
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