The Herald Bulletin

February 10, 2014

Maureen Hayden: Local officials not convinced on Pence tax reform


The Herald Bulletin

---- — INDIANAPOLIS — Indiana Gov. Mike Pence has spent several months pushing the idea of repealing the business personal property tax that provides $1 billion-a-year revenue stream for schools, libraries and local governments.

But he’s yet to come up with a plan for replacing those lost dollars.

He’s argued generally that freeing businesses from the burden of paying taxes on their equipment will spur economic growth. And that, in turn, will lead to prosperity that will boost the fortunes of local communities.

Elkhart County Commissioner Mike Yoder has another idea: To replace the revenue lost by the locals, the state should go after the dollars lost in offshore tax havens used by businesses to dodge paying their taxes.

“Why aren’t we recouping some of that tax revenue?” Yoder said. “The state could go after that money and turn it over to the locals as replacement revenue.”

It’s a question asked only half in jest. According to a new report published in Governing magazine, state governments failed to collect more than $20 billion in tax revenues in 2011 from corporations that socked the money away in the Cayman Islands and other well-known tax havens.

The report, by the U.S. Public Interest Research Group, identified 31 states that saw more than $100 million in corporate tax revenue go uncollected in 2011. Indiana is one of those: it lost $463 million to offshore tax havens, according to the INPIRG report.

Only two states, Montana and Oregon, have passed legislation to recoup some of that money, by requiring companies to report profits from subsidiaries in select foreign countries known for their tax-dodging loopholes. The INPIRG report speculates on one reason why more states haven’t moved on the issue: Well-funded business groups employ ample resources to oppose tax reforms.

Whatever the reason, the proposal from Yoder is compelling for another reason.

He’s a fiscally conservative, business-supporting Republican like the governor. He too wants to see prosperity return to his community, hit hard by the 2008 recession that cut deep into his county’s manufacturing economy.

Yoder, owner of a family farm and on his third term as a county commissioner, has already witnessed what happens when local governments lose revenues. Between 2009 and 2010, Elkhart County government cut $11 million in expenses. He’s proud they did it without cutting essential public services.

He’s doubtful he can make that same claim again. The end of the business personal property tax in Elkhart County would take away about $2.4 million from county government each year, on top of the $4.6 million lost annually through property tax caps imposed by the Legislature in 2008. In all, the schools, libraries and local governments in Elkhart County would lose more than $23 million a year.

Yoder’s vocal disagreement with Pence, echoed by GOP mayors and county officials throughout Indiana, peels back the partisan labels of Republican and Democrat.

Locally elected officials, no matter their party loyalty, can’t see how their local governments would function if so much of the money they’ve relied on to pay police, pave their local streets and provide other services goes missing.

The governor keeps promising those local leaders that their communities won’t be “unduly harmed” by his plan. But his continued refusal to define what that means confounds them.

And it causes a loyal Republican like Yoder to fear the worst: “It’s just going to rip the heart out of local government.”

Columns by Maureen Hayden, Statehouse bureau chief for CNHI’s Indiana newspapers, appear Mondays in The Herald Bulletin. She can be reached at Maureen.hayden@indianamediagroup.com.