Plan Would Reduce, Make Indiana’s Corporate Income Tax Rate More Competitive
State Sen. Brandt Hershman (R-Lafayette), chair of the Senate Committee on Tax and Fiscal Policy, is introducing legislation this session aimed at creating jobs by lowering Indiana’s corporate income tax rate and implementing other recommendations made by last summer’s Economic Development Study Committee.
Hershman said the legislation would modernize Indiana’s corporate income tax rate, which is one of the highest in the Midwest and nationally and is seen as a hindrance to job creation in a global economy. Specifically, Hershman’s proposal would lower Indiana’s corporate income tax rate from 8.5 percent to 5 percent.
“Indiana is an attractive place for employers,” Hershman said. “We have a relatively low cost of doing business, a great workforce, excellent colleges and universities and comparatively low property and individual income taxes. But there is one element of our tax structure that is out of proportion to the rest and that is the corporate tax rate. Not only are we one of the highest in the United States, we have a higher combined federal and state corporate tax rate than Japan, Germany and China.”
As the nonpartisan Tax Foundation has recognized, Hoosiers benefit from an otherwise advantageous, pro-growth state tax system.
“If we improve this one outlier, we will not only move up from our current ranking as the 10th best business tax climate in the nation, we could make Indiana the destination of choice for new employer growth as the economy recovers, as well as employer expansion and all the jobs that come with it,” Hershman said.
Hershman’s legislation is the result of a unanimous recommendation by a bipartisan panel of lawmakers and business leaders who met this summer and fall to examine ways to improve economic growth in the state. Other highlights of the bill include:
- Calling on the State Board of Education, the Commission for Higher Education and the Department of Workforce Development to develop entrepreneurship educational programs for students in K-12 and higher education, as well as members of the workforce;
- Directing the Indiana Economic Development Corp. (IEDC) to conduct a study to determine specific sectors of the economy that the state and local economic development organizations can emphasize;
- Extending the Economic Development Study Committee through 2014 and directing committee members to consider methods for eliminating or reducing personal property taxes statewide;
- Requiring state and local economic development organizations to collaborate on their efforts and report their results annually to the study committee; and
- Focusing Indiana’s public colleges and universities on expanding programs for turning technology and innovation research into commercial uses.
Analysts with the nonpartisan Legislative Services Agency are working on the fiscal impact of the bill. Hershman acknowledged that lowering the corporate income tax rate will have an up-front cost in the form of lost tax revenue, but the bill includes provisions to help offset the cost without requiring a general tax increase on Hoosiers.