Business wins, renters lose

Some folks are quite happy with House Enrolled Act 1001(ss), the tax restructuring bill signed into law Monday by Gov. Frank O"Bannon. "This is the most monumental legislative package passed in the more than 30 years I"ve been in public life," O"Bannon said. "Lawmakers can be proud to have voted for legislation that will make a positive difference in the lives of so many Hoosiers."

Rep. William Crawford

Business leaders are happy, too. Indiana Chamber of Commerce President Kevin Brinegar called it the "best tax restructuring package for business." His pleasure is no surprise, as the new law gives several tax breaks to Indiana"s larger businesses, including total elimination of the corporate gross income tax and business inventory tax. Homeowners will also benefit from the new tax structure due to a decrease in their property taxes.

But some legislators say people who rent their homes will have to pay the price for others" tax breaks. State Rep. William Crawford (D-Indianapolis) spoke on the House floor in opposition to the new law, and was one of 45 House members to vote against the bill. "It was not a balanced tax restructuring because it all but ignored the needs of renters," he says.

Some highlights of the new law:

ï Homeowner property taxes cut by an average of 13 percent

ï Business inventory tax eliminated over five years

ï Corporate gross income tax and supplemental income tax eliminated

ï Sales tax increases from 5 percent to 6 percent

ï Gasoline, cigarette and gambling tax increases

ï Raised around $600 million to offset budget deficit

Although homeowners had their property taxes cut, renters were not so fortunate. A court-ordered Indiana property tax reassessment is expected to lead to a significant increase in the tax burden of residential housing and a corresponding decrease in taxes on business property. According to a report prepared by Paul Ricketts, Lawrence Township assessor, Marion County apartments of less than 20 years of age will see between 91-101 percent increase in their assessed value.

Marion County renters, who account for over a third of the county"s households, may see that tax increase reflected in their monthly rent. Many providers of low-income housing have already said they cannot absorb higher tax costs and will have to raise rents instead. ("Increasing the Burden," NUVO, Feb. 27, 2002)

Last week, in a multicity state tour promoting the new tax law, Lt. Gov. Joe Kernan said low-income Indiana residents should be pleased. Kernan pointed out an increase in the renter"s deduction and a change to the state"s earned income tax credit. "That means Hoosiers win," he said.

But some Hoosiers win more than others. The increase in the renter"s deduction amounts to only about $17 more in the pocket of a renting taxpayer each year, an amount easily wiped out by a rent increase. And human services advocates say even the people who will see a larger earned income credit won"t gain enough to offset the money they will lose from the hike in sales tax. A House proposal to include pull-tab gambling in Indianapolis and other areas was stripped way from the final bill in the Senate, even though some of the tax revenue from the pull-tabs was to be directed toward creating more low-income housing.

Legislators like Crawford and House Ways and Means Chairman Pat Bauer (D-South Bend) also express concern about the soundness of the bill"s budget assumptions. One of the assumptions is that the recession-battered state will see a 5 percent economic growth rate in the near future. Another is that increased tax revenue will be generated when all 10 of the state"s casino riverboats choose to remain docked so that gamblers can come and go at any time. Both assumptions are far from guaranteed. If they fail to materialize, the new law may not completely pull the state from its economic rut. "It"s a quick fix only," Crawford says. "In late November or early December," after the election, "we"ll begin to hear that we haven"t solved the budget problem."