Posted on

State government can afford to give tax reductions

Earlier in the 2022 Session of the Indiana General Assembly, the House of Representatives passed House Bill 1002 with major bi-partisan support. The bill contained tax reductions totaling nearly $1.3 billion once fully implemented. These tax cuts included both broad reductions that helped every Hoosier taxpayer and targeted reductions that spur business investments in Indiana.

The Indiana Manufacturers Association specifically supports the provisions of the bill that reduce the cost of upgrading equipment and investing in technology. We know that capital investment will be critical to continued success in the globally competitive manufacturing sector, and our members want to make those investments in Indiana.

Unfortunately, Senate Republicans stripped these tax cuts from HB 1002, taking a House bill that cut taxes by over a billion dollars to a Senate version with $0 in tax cuts. In doing so, Senate fiscal leaders not only ignored the economic benefits — several of these tax breaks only accrue to the taxpayer if they actually make investments — but their own revenue numbers.

Currently, the State of Indiana has over $5 billion in cash reserves, which amounts to nearly 30% of annual expenditures. The latest revenue forecast for the state predicts an additional $1.9 billion in tax collections above what was anticipated for Fiscal Year 2022 and an additional $1.4 billion in tax collections for FY 2023. These dollars are tax collections above the amounts budgeted when the current two-year state budget was adopted last spring.

One of the tax cuts stripped by the Senate was a reduction in business personal property taxes for new equipment purchases. Revenue from this tax goes to local units of government. Despite false claims that this bill would eliminate this tax, the bill, as crafted by the House, only cut 0.6% off the annual 3% growth in this bad tax.

According to data reported by local units to the state in July, many local units of government are seeing record-breaking budget balances that in many cases exceed 100% of annual expenditures. Collectively, county governments have cash balances of $1.66 billion; cities and towns, $1.56 billion; schools, $2.01 billion; townships, $259 million; and other taxing units, $622 million. In total, local units of government in Indiana have cash balances of $6.1 billion, which is over 40% of the approximately $14 billion in budgeted expenditures for those units in 2022.

Property tax collections are expected to see a steep increase, driven by rising values, particularly home values, and the highest rate of budget growth in over 10 years. And the same increase in income tax revenues that the state is experiencing will also flow to local units.

Economic development and fiscal policy that focuses on growth and private-sector investment is extremely important to Indiana manufacturers. So too are quality government services by the State of Indiana and local units of government. Indiana’s leaders are able to do both. They can afford it.

Brian Burton|

President/CEO

Indiana Manufacturers Association

LATEST NEWS