Indiana’s Economic Outlook Places High on “Rich States, Poor States” Ranking

The American Legislative Exchange Council (ALEC) just released its 2015 “Rich States, Poor States Rankings,” which positions Indiana as having the third best economic outlook in the nation.

You can view the full report online. The economic outlook criteria is explained: 

The Economic Outlook Ranking is a forecast based on a state’s current standing in 15 state policy variables. Each of these factors is influenced directly by state lawmakers through the legislative process. Generally speaking, states that spend less—especially on income transfer programs, and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that tax and spend more.

 

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Why the Chamber Supports Common Construction Wage Repeal

Indiana Chamber of Commerce President and CEO Kevin Brinegar on the decision of House Republicans to pursue House Bill 1019, which would repeal the state’s common construction wage statute. The bill passed the House Employment, Labor and Pensions Committee early this afternoon:

“The Indiana Chamber of Commerce, although surprised to learn of the addition of this issue to the 2015 legislative agenda, has been a strong supporter of this common sense reform for decades. In a year in which a new two-year state budget will be adopted, actions that help provide additional taxpayer protections are particularly important.

“Repealing the common construction wage removes government-mandated pay scales and restores fair and open competition to public construction projects. With local governments and schools facing increasing financial pressures, projected taxpayer savings of between 10% and 20% per project are welcome news.

“The arbitrary common construction wage process prevents accountability on taxpayer-funded projects and often precludes local contractors from bidding for local work. Other states that do not have a common construction wage law have realized demonstrated cost savings, while maintaining the high-quality work delivered throughout the construction industry.”

Legislative Testimony: Annual Mega Department of Revenue Bill

The Indiana Chamber’s Bill Waltz testified today on Senate Bill 438 – State and Local Tax Issuesauthored by Sen. Brandt Hershman (R-Buck Creek). The Chamber supports various provisions and the general intent of this Department of Revenue bill, but also opposes other aspects at this time.

The Chamber generally supports the effort in this bill to clarify a number issues and ease administrative burdens for both the Department of Revenue and taxpayers. However, there are several new provisions that still need work in order to be confident that the language will fulfill the apparent intentions.

The Chamber has serious reservations regarding attorney-client and deliberative process privilege provisions as written. Additionally, the Chamber opposes changing the Tax Court’s standard of review of the state Department of Revenue decisions.

This is a very complicated bill and our position will be adjusted as amendments are made; our support and opposition will match the degree that our concerns are addressed.

Legislative Session Begins; State Budget Will Dominate

statehouse picHow will the money be prioritized? That’s the overriding question as lawmakers return to the Indiana General Assembly today to start work on a new two-year state budget.

The Indiana Chamber will be pushing for substantially more dollars for an expanded education-based preschool program for low-income families.

Prudent financial decisions are necessary in budget sessions but so too is investing where it makes great sense. The current five-county preschool pilot program is inadequate. Indiana has too many children entering kindergarten unprepared to learn. The need is further underscored by the 1,800 applicants for the 450 slots in the pilot program.

The Indiana Chamber will also will be advocating for the state budget to include funding for workforce training with increased designations for high wage career areas, like those in science, technology, engineering and math.

In other education matters, the Indiana Chamber has a longstanding policy of making the state superintendent of public instruction an appointed position and will be seeking to start that on course to becoming reality.

While the political challenges are obvious, we are encouraged that legislative leaders recognize that something has to change. At a minimum, there is consensus for some level of surety that the State Board of Education will function more smoothly and stay on task.

The Governor’s proposal of letting the State Board of Education elect its own chair is a concept the Indiana Chamber can endorse and would be a good starting point if making the superintendent an appointed position is unable to prevail this session.

In the tax arena, there appears to be strong interest among the General Assembly to provide relief to small business personal property tax filers. Indeed, the Commission on Business Taxation has voiced its support for getting rid of the tax for these users. And that’s what the Indiana Chamber wants to see happen.

The current process is time-consuming and ineffective. All sides would come out ahead with a small business exemption. Much effort is spent by small businesses and their local governments on these returns. And for what? The tax liability often averages between only $10 and $50 per small business. In total, these returns come to a mere 1% of the overall business personal property tax collected.

Read about the Indiana Chamber’s top legislative priorities as well as additional areas of focus for the 2015 legislative session.

Job ‘Casualties’ Mount Due to Device Tax

16446238In our most recent Indiana Chamber Policy Call with Congressman Todd Rokita, the subject of the medical device tax came up. No surprise. It’s been a topic in countless conversations ever since the terrible idea was first broached in 2010.

Rokita expressed confidence that repeal will make its way to the President’s desk in 2015. What happens then, of course, can’t be predicted.

A recent Site Selection article notes that concerns have only multiplied. It contains quotes and analysis from Cook Group chairman and long-time Indiana Chamber board member Steve Ferguson, who says five plants (each would have employed up to 300 people) have been “put on hold” because of the tax.

Check out the full article.

Momentum for Significant Changes to Indiana Taxation

Since 2002, there have been numerous changes to the Indiana tax laws to improve Indiana’s competitiveness, while at the same time implementing cost controls and preserving Indiana’s ability to balance its budget. Notable changes include the elimination of the gross income tax and the supplemental net income tax; the elimination of the inheritance tax; reductions in income tax rates for individuals, corporations and financial institutions; numerous deductions and credits designed to stimulate economic development; and the addition of property tax caps. As a result, various national studies have recognized Indiana’s ability to improve its tax climate while maintaining fiscal discipline. The Tax Foundation in Washington, D.C. recently ranked Indiana’s tax climate the eighth best in the country on its State Business Tax Climate Index.

Indiana, however, isn’t resting on its laurels. On June 24, the Governor hosted the Indiana Tax Competitiveness and Simplification Conference, comprised of a mix of national and local economists and tax practitioners. As its name suggests, this one-day conference was intended to identify and discuss ways in which Indiana could make improvements to its tax laws to enhance Indiana’s competitive positioning and to simplify its tax laws and tax procedures. In September, the state issued its 70-page Tax Competitiveness and Simplification Report.

The Legislature had a similar initiative, but one with a different approach. The Legislature created a “blue ribbon” committee to study Indiana’s business tax structure. Members of the committee were designated governmental leaders and representatives of select interest groups and key organizations (including the Chamber). The committee met three times to hear testimony from national and local groups and individuals, and then concluded with a meeting on November 12 to discuss and approve its findings and recommendations.

The scope of the topics discussed has been extensive. The discussions have included some “big ideas,” such as elimination of the personal property tax, the broadening of the sales tax base to include more services, the elimination of the corporate income tax or the reduction of the sales tax rate if the sales tax base is broadened and the idea of turning Indiana into a forced combination, or unitary, state. Big ideas to eliminate taxes in their entirety, or reduce tax rates, and even many of the less ambitious ideas, raise issues of finding replacement revenues to balance the budget and maintain Indiana’s fiscal discipline. Other ideas, such as broadly taxing services or making Indiana a unitary state, may raise revenue to “fund” other changes, but they raise significant policy questions and potentially undermine Indiana’s goal of being more competitive and simplifying its tax laws.

This should not, however, be written off as an academic exercise. There have been numerous ideas in which there appears to be a consensus of opinion for change. Some are areas in which there is very little or no discernible fiscal cost. Those areas include ways in which tax procedures can be improved and streamlined. There are other areas in which there is a conceptual consensus for change, but the improvements would have revenue implications of varying degrees. An example is simplifying Indiana income tax by reducing the number of “decoupling” adjustments from federal taxable income. For the most part, there is a revenue cost to each decoupling adjustment.

The state’s report indicates that it envisions a “package” which will be revenue neutral. It includes a discussion of over 50 ideas, which does not include all of the ideas discussed at the conference or in the white papers prepared by conference speakers in advance of the conference. Some of the topics discussed in the report are very specific and include recommendations. Those seem the most likely to be presented to the Legislature during the 2015 session. Others topics were discussed in less specific terms and appear to reflect the state’s view that additional analysis and discussion is needed. These topics appear more likely to be presented in future sessions if at all. The Legislative blue ribbon committee made 19 recommendations, with more focus on property tax changes.

This chart identifies some of the topics which have been discussed, as well as possible prospects for change. With the high level of effort this year to identify areas for improvement, there is a genuine opportunity to enhance Indiana’s tax climate and legitimate reason for optimism. On the other hand, a package which contains elements that raise revenue in order for the package to be revenue neutral or the temptation of the state to add or exclude elements in a package which give the state an unfair advantage in dispute resolution, could result in a package which includes provisions reflecting highly questionable tax policy and that hurt Indiana’s competitiveness and create further  omplexity to Indiana’s tax system, the exact opposite of the stated goals from the Governor’s tax conference.

Consequently, cautious optimism might be the best characterization.

While we do not yet know exactly what will be presented to the Legislature in 2015, many changes will likely be proposed and discussed. It could be an exceptionally interesting session.

Mark J. Richards is chairman of the Indiana Chamber Tax Policy Committee and a partner at Ice Miller LLP. 

Many Tax Issues Under Consideration in Indiana

The Indiana Department of Revenue has posted the final report (with recommendations arising) from the Governor’s Tax Conference in June. The 70-page document is very comprehensive and interesting, containing a wide range of suggestions being endorsed by the Pence administration. Much is good, but there are also items that will raise some concern.

If you are a tax professional working for or representing an Indiana company, you need to review this report. It covers so many different subject areas that it is nearly certain that you will have a direct interest in something contained in the report. Whether it be the throw-back rule, personal property tax filings or any number of administrative issues, you will find something in this report to note and track, because some will surely serve as the impetus for legislation in the coming session.

Additionally, the Commission on Personal Property and Business Taxation has now met three times and taken a great volume of studies, presentations and testimony under consideration. The committee has taken on so many issues that the chair, Sen. Brandt Hershman (R-Buck Creek), announced that he has scheduled a meeting for November 12 to give commission members ample opportunity to discuss their final report (which was to be submitted prior to November 1).

It is difficult to guess whether the committee will make many detailed recommendations, but its final report will, in any case, include a great volume of information, data and recommendations from those who participated in the fact-finding exercise. It would be worthwhile to scan these documents presented to the commission to determine the matters that could impact your company. Here again, these matters will likewise almost certainly, in some part, serve as the basis of proposed legislation.

Retirement Plan Sponsors: Feeling Out of the Loop?

ProCoursePrince is with ProCourse Fiduciary Advisors, LLC, a registered investment advisor.

Seventy-three percent of human resources professionals said they have needed to become experts on health care and retirement to do their job effectively. When was the last time you were comfortable stating that you understood all of the rules and regulations your job title or position requires you to comply with?

With regard to regulatory matters, one thing is constant: change. As regulators are starting to more closely examine retirement plans, it is important for those individuals who are responsible for overseeing their company’s retirement plan to pursue continuous training and stay up-to-date with industry-related best practices. Fortunately, you do not have to go far to seek this training as the Indiana Chamber of Commerce is hosting, “Best Practices for Retirement Plan Fiduciaries,” which will help you:

  • Learn from the mistakes of others by reviewing recent court cases (with an emphasis on what they should have been doing)
  • Review current trends from the Internal Revenue Service and the Department of Labor and know what to be on the lookout for
  • Identify how you can perform a self-audit of your retirement plan and potentially uncover easy fixes that could otherwise lead to costly errors
  • Hear about what politicians and regulators are considering changing with respect to your role in administering your retirement plan

Our goal is to help retirement plan sponsors obtain a better grasp on their roles and responsibilities and determine areas where they can improve their efforts so to better protect themselves as a fiduciary and, in the end, provide a better retirement plan for their employees.

INVESTIndiana Returns Sept. 23

Leading Indiana companies will participate in the fourth INVESTIndiana Equity Conference on September 23 at the Conrad Indianapolis.

Fund managers, analysts and institutional investors are primary attendees, with the event open to others in the business community. An Executive Roundtable opens the day. The keynote speaker is William Testa of the Federal Reserve Bank of Chicago. Twelve companies, including six financial institutions, are scheduled to make presentations.

They cover the state, including 1st Source Corporation (South Bend), Escalade (Evansville), Hillenbrand (Batesville) and nine others. Full information and registration is available online.

Financial Fitness for Freshmen

The following Money Management column is provided jointly by the American Institute of Certified Public Accountants and the Indiana CPA Society as part of the CPA profession’s nationwide 360 Degrees of Financial Literacy program.

As you get ready to go away to college for the first time, this is a good time to expand your knowledge of day-to-day money management, including smart budgeting and debt management steps. The Indiana CPA Society offers these tips to students who want to get through college with the right financial footing.

Start on a Budget

You may be surprised at the high everyday costs of college, including books and supplies, daily living expenses and travel to and from school. That’s why it’s a good idea to get a sense of what you will spend – outside of tuition costs – before you begin each semester. Include savings you plan to use, any money you may receive from your family and the income you can expect from any jobs.

According to a Nationwide survey, the average student income is about $1,400 a month from part-time jobs and parents. Semesters usually last about four months, so divide your projected total to determine how much you can spend each month, after deducting the amount you can expect to pay for books at the beginning of the semester. It’s also a good idea to track your actual spending throughout the semester, so that you can more accurately project and adjust your budget for the years to come.

Get What You Need

Once you know your income, determine a list of expected expenditures each month. Be sure to remember the difference between wants and needs. Textbooks and supplies are clearly mandatory, but weekend trips, nights out and new clothes are not. Even a car can quickly drain your resources if you’re cash strapped.

Feed the Pig, the AICPA’s financial literacy site aimed at young people, recommends recording every time you make a purchase so that you get a good sense of where your money goes. Then categorize all the items, to see if you’re spending as much on morning coffee as you are on weekend entertainment. These steps allow you to understand where you might need to cut back or reconsider your spending choices. If you’re honest about your real necessities, it will be easier to create a workable budget, and find ways to save.

Avoid Credit Card Debt

College seniors with credit cards graduate with an average of $4,100 in credit card debt, according to the Nationwide survey. The importance of budgeting is clear when you see the consequences of spending beyond your means. Many students use credit cards to stretch their spending money, but given the high interest rates involved that can be a costly choice.

For example, if you have a $4,100 credit card balance, at an 18% interest rate and you make a $200 payment each month, it will take you 25 months to pay off that balance and it will cost you a whopping $836.27 in interest, money you could have spent on other purchases or put aside in savings. That debt is a big burden to carry, especially since so many graduates also have significant outstanding student loan debts.

Debt can make it more difficult to find or afford your own place or to qualify for an auto or other loan. The best advice: If you’re going to reach for the plastic, make sure it’s a debit card. That way you will spend only what you have in your bank account now and avoid overextending yourself.

Your Local CPA Can Help

College is an exciting time that offers many new experiences, including managing your own money. If you or your family has questions about financial topics, be sure to consult your local CPA. He or she can help you address all your important financial concerns.