Strangely, there is little opposition to eliminating taxes on the equipment (personal property) of Indiana’s businesses. The question is how to replace the $1 billion in revenues lost by Indiana’s counties, cities, towns, school corporations and libraries. That’s significant money for police, fire and other public services.
Gov. Mike Pence and his allies are scrambling to find a replacement for those lost revenues. Raise the state’s sales tax? No one favors that. Allow local governments to impose a sales tax? Never! That would be anarchy, chaotic competition among neighbors.
Thus far, the most favored idea allows communities to raise one of the local option income taxes. State politicians like this because local office holders will be blamed for the higher taxes.
However, back up just one step and reconsider this entire matter. The governor and his allies preach the benefits of lower taxes as an incentive for businesses to locate jobs in Indiana. At the same time, just about everyone agrees that Hoosier workers are ill-prepared for the demands of the modern workplace.
Who benefits from a better-prepared workforce? Mainly, it’s those companies installing new equipment that seek better-prepared workers. Thus, under the principle of beneficiary taxation, businesses should pay for the updating of the existing workforce and the education of the future workforce.
What about a statewide personal property tax with a single rate? Currently that rate varies from one jurisdiction to another. Additionally, the state, not the locality, assesses the value of that equipment.
Further, the billion dollars raised from the tax could be earmarked for vocational education at all levels, in all its many forms from accounting to zoology.
This means changing education, which everyone seems eager to do.
We have spent decades believing more education will bring monetary rewards to the individual. More education was once a route to becoming a more articulate, cultured and engaged citizen. Today, more education has become an investment from which there should be a monetary return.
If education is to supply the workforce businesses want, then firms (or their associations) should be more involved in the preparation of the workforce. Either businesses train workers directly or hire institutions to do that. The link between firms and schools would have to be strengthened.
Businesses don’t want to get involved with education. They want workers with certain behavioral characteristics (showing up on time) and specific job skills. Today, however, the variety of jobs keeps changing.
Hence, employers want workers who can relearn rapidly or adapt to new demands quickly.
Modern equipment seems to drive the demand for better trained workers. The property tax on business equipment is well suited for financing the necessary supply of qualified workers.
This does not relieve the legislature from finding other funds to sustain local services. It is, however, a move toward letting businesses pay for the education services they use.
And won’t more firms bring jobs to Indiana if we have a better trained workforce?
Morton Marcus is an economist, formerly with the Indiana University Kelley School of Business. Send comments to firstname.lastname@example.org.