INDIANAPOLIS (AP) — The Indiana Senate has approved a measure cutting the state's business equipment and corporate income taxes, a move that has some local leaders worried.
The Senate plan would cut the personal property tax for companies — about 70 percent across the state — that have less than $25,000 worth of business equipment and cut the corporate income tax from 6.5 percent to 4.9 percent. Lawmakers approved cutting the state's corporate income tax rate from 8.5 percent to 6.5 percent three years ago.
The Senate voted 35-11 Thursday along party lines to send the measure to the House.
Senate Democrats argued the state's many tax cuts have led to a reduction in services and aid and have contributed to an atmosphere of blindly giving business most of what it seeks.
"We haven't really figured out: 'Are we giving away too much for too little?'" said Sen. Karen Tallian, D-Portage.
But supporters of the tax package, developed at the recommendation of Gov. Mike Pence and the state's largest business lobbyists, argued that the series of tax changes and other measures — such as the right-to-work ban on mandatory union fees approved in 2012 — made the state able to retain and attract businesses.
Republican Gov. Mike Pence rolled out his legislative agenda last month with a call for the elimination of the state's business personal property tax, which is levied on business equipment and mostly affects large manufacturers.
Senate Appropriations Chairman Luke Kenley, R-Noblesville, said that legislative Republicans had worked out a compromise plan that benefits businesses across the board.
"Frankly, I believe that this (corporate income tax cut) is a much better tax cut to deal with than the personal property tax cut," he said.
The vote came shortly after a coalition of local government groups announced they would seek state aid to fill budget holes that would be created by the cuts. The group includes lobbyists representing the state's municipalities, county governments, police chiefs, fire chiefs, school superintendents and others.
The group noted that other states that had eliminated their business equipment taxes, including Michigan, found ways to protect their localities from budget strife.
The cuts could cost local governments and school districts hundreds of millions of dollars. Indiana Association of Cities and Towns Director Matthew Greller said that property tax caps placed in the state constitution in 2008 and a struggling economy have combined to stretch many local governments too thin.
"I think we all see this as the most significant piece of revenue loss coming down the road that local governments have ever seen in the state of Indiana," Greller said Thursday.