Indiana Senate panel starts work on tax bills

AP News
Posted: Dec 01, 2009 3:48 PM

An Indiana Senate committee got a jump-start Tuesday on discussing bills on unemployment taxes and property tax caps and plans to vote on them next week _ about a month before the full Legislature convenes.

There were not enough members of the Senate Tax and Fiscal Policy Committee present to vote on the measures, but Republican Sen. Brandt Hershman of Wheatefield, the panel's chairman, said he planned a Dec. 8 vote. The bills are expected to pass and would then be before the full Republican-controlled Senate when the session begins in earnest on Jan. 5.

"I think what we're doing here is showing a commitment to the taxpayer to get a jump on these issues and deal with them as quickly as possible, so we're going to have a product to deal with in the first couple days of the regular session," Hershman said.

One measure discussed Tuesday is a resolution aimed at putting caps on property tax bills into the state constitution. It was approved in 2008 but must be passed again this session and then be approved by voters in November to be amended into the constitution.

Under a law passed in 2008, property tax bills on homeowners this year were capped at 1.5 percent of their homes' assessed values, with 2.5 percent limits on rental property and 3.5 percent caps on business property. The caps are to be lowered to 1 percent, 2 percent and 3 percent, respectively, in 2010 _ limits that would be in the constitution if supporters get their way.

The caps are expected to save property owners about $465 million in 2010 and $488 million the next year _ money local governments and schools will not get as a result.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, noted that counties can pass or increase local income taxes to make up for some of the lost revenue, and local governments and schools can hold referendums and let voters decide if the caps should be exceeded.

But, he said: "The only way to guarantee that the controls stay in place is to put them in the constitution. Turn it over to the public and let them decide."

Sen. Timothy Skinner, D-Terre Haute, said the caps will have a devastating effect on local governments and there should be no hurry to make them permanent.

"Here we are rushing to make this decision based on politics more than policy," he said.

Democrats who control the House plan a committee hearing on the resolution next week, but they haven't committed to holding a vote.

Legislators enacted a law last year that would phase in an increase on unemployment insurance taxes that employers pay beginning Jan. 1. A bill discussed Tuesday would delay the increase for one year, saving employers more than $250 million.

Senate Republicans say the delay would help companies retain workers and possibly wait long enough for a federal bailout. They say Indiana's economy hasn't recovered as much as lawmakers had hoped and that delaying the tax increases for one year would save jobs.

The state has been paying out hundreds of millions of dollars more in unemployment benefits than it has been taking in through taxes and so far has borrowed more than $1.3 billion from the federal government to keep the fund solvent. That figure is expected to climb to $1.7 billion by January.

Business groups testified in favor of the delay, saying a tax increase now will force businesses to make layoffs that will lead to more jobless claims.

But Skinner said lawmakers took a proactive step last session to begin shoring up the unemployment fund, and employers should pay their fair share.

"If it (the tax increase money) goes into the pockets of employers, it's not going to help the state of Indiana," he said.

House Speaker Patrick Bauer, D-South Bend, has said he would keep an open mind about the plan.