2002 REPORT CARD

Tax Restructuring

Position: The Chamber’s focus during the 2002 Legislative Session has been enactment of comprehensive restructuring of Indiana’s tax code to reduce reliance on the property tax and to adopt policies that encourage economic growth. For more than thirty-five years The Chamber has supported the elimination of the Inventory Tax as a major position.

Outcome: Bi-partisanship finally emerged to save the tax restructuring bill at the end of the special session of the Indiana Legislature in June. In the Senate it took 12 Democrats to help 21 Republicans pass the bill back to the House. In the House it took 12 Republicans to cross over and help 39 Democrats come up with the 51 votes needed for passage. The divided legislature realized that this was more important than partisan politics and required votes on principle. While there was still considerable disagreement over the merits of each segment of the bill, the majority felt it was more important to make a decision that would create a climate for business growth in Indiana.

For business, the new legislation makes Indiana competitive with our neighboring states. First, the Inventory Tax will be phased-out over five years. There is also relief for “production in progress.” Second, business property tax is reduced by an average of 23.4%. Third, the Gross Income tax and the Supplemental Net Income taxes are eliminated while the Adjusted Gross Income tax is increased to a rate of 8.5%. Fourth, the budget will provide $15 million for Indiana’s 21st Century Research and Technology Fund. In addition, the bill created a new Venture Capital Investment Tax Credit and also increases the Research and Development Tax Credit to 10% and repeals the in-state apportionment formula. These are significant improvements that will create new jobs as business and industry expands in Indiana and in the long run provide more state funding.

For homeowners there will be relief from the affects of court mandated reassessment to market value assessment. Not only will the average home not have up to a 33% tax increase but the projections are that homeowners will average a 13% decrease in property taxes. This was done by moving a total of 60% of school funding to the state, providing a $35,000 homeowners exemption, providing up to a $2500 deduction on income taxes for renters, and establishing a new 20% Property Tax Replacement Credit on all individual and business real property (includes manufactured/mobile homes and individual personal property). State wide property tax which had funded 28.7% of state and local government will now fund less than 24%. A one cent increase in the sales tax, an increase of .40 cents on cigarettes, and increases on gaming will make up the difference. Indiana now has a more balanced tax system that fairly spread the cost of government.

Gasoline Tax

Position: The Chamber supports a reasonable increase in the state gas tax to fund INDOT’s 2000 - 2025 Long Range Plan. The Chamber specifically supports full funding of the US 31 corridor between South Bend and Indianapolis.

Outcome: Realizing that the current rate of taxation on gasoline would not raise enough funding to pay for Indiana Department of Transportation’s twenty-five year plan, The Chamber supported an increase in the gas tax. The legislation, as passed, increases the gas tax by .03 cents with one cent going for state highway bonding of road construction, one cent for state highway funding, and one cent for local highway funding. This money is not only important for funding of the US 31 corridor between South bend and Indianapolis, but includes necessary match money for local governments to receive federal highway funds. While this increase is sufficient for the next couple of years, additional funding will be needed to continue making the necessary infrastructure improvements to continue economic development in the state.