Pence Misrepresents Business Tax Burden In Pushing Elimination Of Business Personal Property Tax

Surely Gov. Mike Pence wouldn't mislead the public about the taxation burden faced by Indiana businesses in pushing the elimination of the business personal property tax, a move that would save businesses about $1 billion a year currently relied upon by local governments statewide as a source of revenue, would he? That's what the Northwest Indiana Times' Dan Carden concludes that Pence is doing in comparing the state's business tax burden to surrounding states.

"This is just a bad tax in a state where you make things," Pence said. "Illinois doesn't have one, Michigan just voted to phase theirs out ... I think it will make Indiana more prosperous, more competitive."

Repeatedly left unsaid -- and perhaps unknown to Pence -- is that while Illinois is one of seven states without a business personal property tax, Illinois companies annually pay a 2.5 percent income tax surcharge known as the "business personal property replacement tax."

The 1970 Illinois Constitution required the General Assembly eliminate the business personal property tax by 1979 and authorized a replacement tax to ensure schools and local governments continued to receive the same amount of money they did when the personal property tax was in effect.

As a result, while Illinois' corporate income tax rate is 7 percent -- the same as Indiana's, though Indiana's is set to drop to 6.5 percent next year -- Illinois businesses actually pay a corporate income tax of 9.5 percent with the business personal property replacement tax included.

Similarly, when Pence speaks about Michigan being on track to eliminate its business personal property tax, he omits that starting in 2016 Michigan local governments can charge an "essential services assessment" on business real estate, to make up 100 percent of the revenue lost due to the personal property tax cut.

Pence also is fond of talking about how Ohio eliminated its business personal property tax in 2010. He never mentions, however, Ohio replaced it with a gross receipts tax, charging a 0.26 percent fee on all taxable business revenue over $1 million for the privilege of doing business in the state.

After all the pushback from local government leaders, Pence has softened his position and said he would go along with a partial replacement of revenues lost from the elimination of the tax. If you think governments are going to do with less under any circumstances, think again. They always find a way of finding other taxpayers to pay when one group of taxpayers are given a break.