Tax Issues Aired by Interim Committee


The Interim Committee on Fiscal Policy, chaired by Sen. Brandt Hershman (R-Buck Creek), met three times in October and took testimony on several important issues.

At the first meeting, the group discussed the pros and cons of granting counties the general authority to adopt a food and beverage tax. Representatives for restaurateurs spoke against; county officials argued in favor of the measure. Following that debate was over four hours of testimony regarding property tax assessment procedures and appeals under Indiana’s market value in use standard – a continuation of the “big-box” issue that was addressed last session. The issue is being revisited as county officials think more needs to be done. Commissioner Jonathan Elrod of the Indiana Board of Tax Review presented a lengthy legal analysis; his memo and a flow chart of the process created under last session’s legislation (SB 436) are part of the collection of documents (Oct. 7 meeting) incorporated into the committee’s proposed final report (Oct. 21 meeting).

But in keeping with traditional practice, this committee is not making any recommendations for future legislation. The draft report simply references the volume of data, memos and other evidence brought before the committee during the course of its meetings. The committee has typically served as a forum to air the issues and collect information. Rarely is there any level of consensus on how difficult tax matters should be resolved; yet the information and discussions do often provide the impetus for various proposals in the next session. This will no doubt be the case as to the assessment issues and other matters considered by the committee.

In the following two meetings, the committee studied many substantial tax issues. It pondered the idea of permanently authorizing schools to pay for several operating expenses such as insurance, utilities and maintenance service with property tax revenues. Generally speaking, property taxes may only fund capital projects and debt service (since the state pays for general operating expenses via the school funding formula). But leeway to pay for these other items with property taxes has been granted on a temporary basis in the last several state budgets.

Purdue professor Larry DeBoer presented a cost-benefit analysis evidencing the ratio of tax pay to benefit received by different categories of taxpayers. No surprise to businesses, the ratio is not good. The committee also looked at farmland assessments (another almost perennial issue). Finally, the group received annual reports from the Legislative Services Agency’s fiscal analysts and economists evaluating existing tax incentives. These reports are always full of hard data on the utilization of numerous credits and deductions. These discussions included consideration of Tax Increment Financing (TIF) districts, the Earned Income Credit (EIC) and the Economic Development for a Growing Economy (EDGE) credits.

The committee’s draft report, and everything that was presented in each of the three meetings, is available for downloading, and archived video of the meetings is available at the at the General Assembly web site.

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