Updated: January 21, 2014 5:38PM
INDIANAPOLIS (AP) — The Indiana Senate’s tax committee approved a package of business tax cuts Tuesday, including a further reduction to the state’s corporate income tax.
The Senate Tax and Fiscal Policy Committee approved decreasing the corporate income tax rate from 6.5 percent to 4.9 percent by 2019 and eliminating state’s business equipment tax for small businesses. The plan was crafted by Senate Republican leaders as an alternative to calls from Republican Gov. Mike Pence and business lobbyists to eliminate the business equipment tax altogether.
Local leaders, rallied by lobbyists for the Indiana’s counties and municipalities, argued that a complete elimination of the tax could short them $1 billion collectively and force them to raise taxes elsewhere. That outcry spurred Pence and Republican legislative leaders to promise the hit to locals would be mitigated.
The governor threw his support behind a House Republican plan last week that would give counties the choice to eliminate the tax on new equipment purchases. Chris Atkins, Pence’s director of the Office Budget and Management, announced Tuesday that the governor would also support the Senate plan.
The Senate measure won tepid support from South Bend Mayor Pete Buttigieg, a Democrat, who thanked lawmakers for going at the cut with a “scalpel” instead of a “cleaver.”
“I think some of the ideas that have been aired at the Statehouse this year would come at our revenue sources with a cleaver, this one is using a scalpel, and I appreciate that,” he said.
Sen. Brandt Hershman, R-Buck Creek, and Sen. Luke Kenley, R-Noblesville, crafted the Senate plan, in part with an eye on the state’s declining tax collections. As part of an offset, the pair proposed reducing or eliminating some tax credits. But a lobbyist for the Indiana Manufacturers Association asked the panel to maintain funding for the state’s research and development tax credit, a favorite among some of the state’s largest businesses, like Eli Lilly.