September 1998
Legislative Tax Reform Preview
The 1999 session of the Indiana General Assembly will see debates (and most likely enactment) of the most significant tax restructuring proposals we have seen in twenty-five years. Governor O'Bannon has promised to take the recommendations of his Citizens Commission on Taxes and formulate a major tax restructuring proposal that he will present to the General Assembly in January. In addition, both Democrats and Republicans made sweeping proposals in the 1998 session and both have made tax restructuring / tax policy the top priority of their elective efforts this fall.
The issue has become particularly important in the House of Representatives given the current 50-50 split in membership. Both sides are engaged in intense efforts to gain outright control and each knows that property tax burdens (along with education and crime) are a critical issue with voters.
Several comprehensive restructuring alternatives have already been presented and debated by the Citizens Commission. These include a discussion document offered by the co-chairs Kurt Zorn and John Huie as well as a proposal by current House Ways and Means Committee Chair Pat Bauer. In addition, Commission member Representative Jeff Espich has outlined a program of state and local spending controls designed to allow permanent tax relief without dollar-for-dollar revenue replacement.
As you might expect, these proposals, and others to follow, vary significantly in terms of their impact on the business community. They also vary considerably in terms of their impact on economic and job growth and Indiana's competitive position. Battle lines are already being drawn among legislators and others. Further, many different business tax increases have already been proposed (albeit in some instances to replace reduced property taxes) including; a) raising the adjusted gross and supplemental net rates, b) increasing the financial institutions tax, c) increasing the insurance premiums tax, d) imposing a new corporate franchise tax e) imposing a Michigan-style single business tax, and more.
As a tax policy advocate for the business community and a member of the Governor's Commission on Taxes, I believe that it is critical for the business community to collectively embrace several key principles and positions with respect to tax restructuring. Without a united business front on these key principles, we are in serious jeopardy of being splintered and conquered. We must stand together.
The Chamber's tax restructuring committee has been analyzing the issue for the past two years. We have looked at numerous studies of Indiana and other state tax climates, and we have analyzed the state's current and projected fiscal condition. From the research, we have developed ideas and priorities and positions for making tax restructuring a win-win situation for the entire business community.
Tax restructuring presents a significant opportunity to address many onerous business tax provisions in our tax code. But it also presents a tremendous threat as some believe that business tax burdens should be increased. In other words, "If we don't hang together, we'll hang separately."
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