Reducing the business tax on equipment and modernizing tax incentives to attract more businesses to Indiana are among the top items on Gov. Eric Holcomb’s 2022 legislative agenda.
Holcomb laid out his modest agenda on Monday, a day before the Indiana General Assembly settled in for its annual session.
One of his more significant proposals would eliminate the 30% depreciation floor on the business personal property tax on new equipment. His proposal is more modest than the gradual phase out of the tax being discussed by some House Republicans. Senate Republicans have been more hesitant about the idea, despite a budget surplus that is expected to grow to $5.1 billion by the end of next June.
The law requires businesses to pay a tax on at least 30% of the purchase price of machinery and equipment every year, even if the equipment is several years old and no longer worth 30% of its original cost. Holcomb’s proposal specifies eliminating the floor on just new equipment and not all equipment, which could lessen the blow on reduced revenue from the tax.
Eliminating the floor for all equipment could cost local governments $170 million. The impact of Holcomb’s proposal would be less than that, removing the floor for just new equipment and pushing the revenue reduction further into the future.
Local governments likely will oppose the tax cut if there’s no provision to replace the lost revenue.
Holcomb’s proposal does not include a plan to make up for lost revenue, though he said his plan would provide plenty of time to come up with a solution.
“It would give us time to actually understand what that price tag is. If we just go whole hog and eliminate it completely across the board, then you’re going to have some significant price,” Holcomb said.
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House GOP lawmakers are also floating the idea of cutting income taxes. Holcomb said his main focus is on the business personal property tax because he sees that as a way to make the state more competitive in attracting businesses, particularly in the equipment-heavy manufacturing sector.
He added that Indiana has high amount of revenue coming in now, in part because of rounds of federal pandemic assistance money. Holcomb said he wants to make sure there is an accurate picture of the state’s economy post-pandemic before cutting taxes more broadly.
“That is the goal,” he said. “I want to pay our bills, and we have some bills out there, and some new ones.”
Another Holcomb priority is to work with lawmakers to modernize the Indiana Economic Development Corp.’s incentive toolkit to remain competitive and attract new business to the state.
That includes making the organization’s portfolio of tax credits more flexible, allowing the IEDC to customize tax incentives to each business. The agenda also calls for enabling the IEDC to focus on providing more upfront incentives, instead of just long-term tax credits. In addition, creating incentives to attract more remote-worker jobs from companies outside of the state for Indiana residents also was a priority.
House Speaker Todd Huston, R-Fishers, said he looks forward to working with Holcomb and the Senate on their shared agendas, and looking at cutting taxes.
Senate President Pro Tem Rodric Bray, R-Martinsville, said in a written statement that he was most interested in the governor’s proposals to expand the economic development toolkit and legislation to streamline the system to get $125 income tax refunds to Hoosiers. The statement made no reference to cuts to the business personal property tax.
“One thing I am particularly interested in, like the governor, is the opportunity to update our economic development tools to help our state continue to become more competitive, create good-paying jobs for all Hoosiers and attract new talent to our state,” Bray said in the statement.
Other items on Holcomb’s agenda:
- Connect unemployed Hoosiers with employers, jobs and training with a data-driven workforce system.
- Establish personnel at the Law Enforcement Training Board to expand development and oversight of statewide training and curriculum that includes implicit bias and cultural awareness.
- Assist local governments with implementing strategies to strengthen cybersecurity.
- Remove the stigma of mental health by creating easier access to people in need of services, building awareness, and expanding education and growing the workforce in mental health.