Hoosier State Today

The Indiana Chamber of Commerce has released the final phase of its tax study, aimed at guiding state lawmakers on potential reforms to Indiana's tax structure. Conducted by Ernst & Young LLP for the Indiana Chamber Foundation, this second phase is titled "Indiana’s Tax System: Actions to Drive Future Prosperity." It assesses the revenue impacts of various changes to the state's tax system and provides data to support economic growth.

Vanessa Green Sinders, president and CEO of the Indiana Chamber, stated, “Providing policymakers with data-driven insights is central to the Indiana Chamber’s mission of fostering a strong business environment.” She emphasized that this analysis helps legislators evaluate different reform impacts before their session begins.

Building on previous findings that highlighted Indiana's overall tax competitiveness but noted challenges in key industries, this latest analysis recommends updates to the property tax system. The focus is on reducing burdens for manufacturing and life sciences sectors. Currently, businesses pay personal property taxes on equipment classified into "pools" with specific depreciation schedules. This complex system poses compliance challenges.

Indiana businesses pay approximately $1.5 billion annually in business personal property taxes, which accounts for about 15% of total statewide collections. This burden affects capital-intensive industries like manufacturing and life sciences more heavily than others.

The study evaluates reforms such as exempting newly acquired equipment from taxation and eliminating depreciation floors that set minimum taxable values. These measures aim to boost competitiveness while maintaining local government revenue stability.

Exempting new equipment could phase out $1.5 billion annually in taxes over time, potentially adding $3.1 billion to state GDP by reducing capital costs by 4.85%. Eliminating depreciation floors might cut annual tax revenue by $45 million but increase GDP by $80 million annually.

Other policy changes considered include adjustments to local option income taxes and alternative approaches for taxing business pass-through income. David Ober, senior vice president of business operations and finance at the Indiana Chamber, commented on these proposals: “However, our property tax system continues to create challenges for industries vital to our economy.”

Sinders expressed optimism about future collaborations: “These findings mark the next phase of an important dialogue,” she said.

The study was developed with input from a committee comprising representatives from key business sectors and other stakeholders. Major investors in this research include Ambassador Enterprises and AES Indiana.

The full study can be accessed at www.indianachamber.com/tax.