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Tax decisions top long to-do list


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State lawmakers are back in session, and a key issue will be taxes, including whether diners in Greenwood will need to pay more for their meals.

Local legislators also will consider ways to increase road funding, how farmland values are calculated for taxes and whether tax breaks or tax dollars given to businesses are effective at creating new jobs.

Those issues will be mixed in with other statewide issues lawmakers will discuss, including eliminating a tax businesses pay for equipment, increasing preschool education options, offering more ways to encourage Hoosiers to get job training and advanced education, and tightening regulations on how local boards manage tax dollars set aside in tax-increment financing, or TIF, districts.

The decisions made will have local impacts. Local school superintendents are monitoring discussions on how to get more children to attend preschool. Mayors in Greenwood and Franklin will watch any proposals that might change how money is collected or spent from TIF districts, which have funded millions of dollars in infrastructure projects in recent years, and whether a business tax cut will cost their cities millions in revenue.

All of those issues and more will need to be considered in a short legislative session, where lawmakers also will debate whether to put to a public vote an amendment to the state constitution banning same-sex marriage. Lawmakers expect that to be one of the first issues they consider.

Franklin Mayor Joe McGuinness said he hopes the same-sex marriage debate will be over quickly.

“Are we really going to be spending time talking this out at the state level when we have other issues that are in need of more attention?” McGuinness said.

Lawmakers began meeting at the Statehouse this week, and the session will end in mid-March. That doesn’t leave much time to work on improving Indiana education, attracting more jobs or considering ways to bring in more revenue to local governments, such as a local food and beverage tax that Greenwood wants to have the option to implement.

State Rep. John Price, R-Bargersville, plans to propose a bill that would allow cities and towns to charge more to people dining out in restaurants or picking up a coffee on the go. The bill would allow cities and towns to approve up to a 1 percent food and beverage tax, which could be used to help pay for local services.

Greenwood is one of about 10 cities and towns that want to be able to add the tax this year and petitioned lawmakers. Price’s bill would allow the local governments to implement the tax as long as the money is used for a defined purpose. For example, in Greenwood the money would be used for parks, police and fire departments and nothing else, he said.

The tax would give local governments that have cut spending due to reductions in property taxes an option to bring in new revenue, he said.

“We’re there to help fill the toolbox for local government to have a way to use it to their advantage. We only approve the concept to allow them to have that,” Price said.

Another tax increase being considered would affect all working Johnson County residents, and the money would be put toward mass transit in central Indiana and to fund more road repairs in the county. The difference: Voters would get to decide whether to implement the tax that would come out of their paychecks.

A mass transit plan for central Indiana has been overhauled this year to include several suggestions presented by Sen. Brent Waltz, R-Greenwood. The plan that stalled at the Statehouse last year would have cost about $1.2 billion to add new rapid transit bus lines, renovate or build new bus terminals and possibly create a light rail line serving northern suburbs of Indianapolis. The cost would have been funded by income taxes of about 1 percent of a person’s paycheck from participating counties.

Under Waltz’s revamped plan, new income taxes would still fund part of the cost but at lower rates. The overall cost of the plan dropped to about $30 million and area companies such as Eli Lilly and Co. that would benefit would have to pay a portion of the cost, too, Waltz said. Counties could approve a tax rate of as little as 0.1 percent, meaning for every $100 earned, a person would pay 10 cents. The money would be put toward regional projects to improve mass transit, but some would also be set aside so that taxes raised in Johnson County be used for local road projects, he said.

“The money that is being paid by the surrounding counties are actually going to the benefit of those surrounding counties and not going into a black hole feeding Marion County,” Waltz said.

Some local legislators are working on proposals to keep property taxes low and make sure the taxes collected by governments are being spent effectively.

Price is working on a proposal to make sure farmers don’t see their property taxes jump by more than 10 percent next year based on the value of their property.

Currently the value of farmland that is used to figure taxes is determined over a six-year period based on the average selling price of land, how much farmers are paying to rent acreage and how productive fields are. In recent years those numbers have spiked, since land prices have risen, farmers are producing more crops and interest rates have fallen drastically, Purdue University professor and tax expert Larry DeBoer said.

Increases in the value of land have led to significant increases in property taxes for farmers, including an expected 16.5 percent jump in taxes for 2015, he said. For example, farmland was valued at $1,170 per acre in 2005, compared with $2,630 per acre in 2010.

“The property that’s being taxed is really more valuable than it used to be, and the numbers that come up reflect that,” he said.

It’s a problem legislators have faced in recent years, including passing a law last year to continue using old assessment rates on farmland to avoid a spike in taxes this year, DeBoer said. Price said he’ll talk with other legislators to find a way to either spread those increases out over a longer period, so farmers maybe only pay a 2 or 3 percent increase per year, or find a way to tweak the formula so that a shorter time period is considered for the land value increases in the future.

“I met with a number of local large farmers in the county, and they all feel the same way. We want to pay our fair share of taxes; but when we see a profit margin of 2 percent, we can’t pay a 13 or 14 percent increase,” Price said.

Lawmakers also will discuss whether to eliminate a tax that farmers and businesses pay for equipment, such as manufacturing machinery or vehicles, after the idea was proposed by Gov. Mike Pence.

Local lawmakers said ending the tax could bring more businesses to Indiana and give existing companies more money to expand. But they also want to find a way to eliminate the tax without shorting counties, cities, towns, schools and libraries more than $1 billion statewide. Johnson County mayors and school superintendents are worried that eliminating the tax could severely reduce their income and force them to cut spending again.

Rep. Eric Koch, R-Bedford, wants the state to start a detailed study of all the tax incentives given to businesses, such as property tax breaks cities give to companies that expand their facilities, cash payments given to companies to help purchase land or new equipment, or training grants given by the state for firms that plan to hire hundreds of new workers.

The in-depth study would give lawmakers a better idea of how much benefit Hoosiers get when their tax dollars are given to businesses and whether certain programs should be discontinued, changed or expanded, he said.

“We may find out there is an incentive that is working really well and we need to put more resources into it. It’s not just a tool for state policymakers but for local units as well,” Koch said.

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