Lawmakers Hold Off on Higher Business Tax in Indiana

March 15, 2010

Democrats and Republicans in the Indiana General Assembly closed some partisan divides on some major issues, including a proposed increased tax on businesses, early on March 13 and adjourned the 2010 legislative session two days before the deadline for leaving.

“All’s well that ends well,” Democratic House Speaker Patrick Bauer of South Bend said before gaveling out the House.

The compromises approved included a one-year delay on unemployment insurance tax increases, some tax breaks and incentives designed to create jobs, and allowing schools to tap into some property tax accounts to help offset a portion of $300 million in cuts for general operating expenses.

Negotiations on those issues between Democrats who control the House and Republicans who rule the Senate ended with deals being struck Friday night and approved with bipartisan support by both chambers before 1 a.m. Saturday.

House Democrats agreed to delay by one year an increase in taxes that businesses pay into the state’s unemployment insurance fund, which has borrowed $1.6 billion in federal money to remain solvent. Republicans wanted to delay the tax increase because they said it would cause businesses to lay off workers in an economy that is still foundering.

In return, Senate Republicans agreed to some job-creation incentives House Democrats wanted.

They include a new employer tax credit equal to 10 percent of the salary of each newly created job, and a program that would allow the state to spend some money to draw down federal stimulus dollars to help subsidize the salaries of people hired who were unemployed or on federal food stamps.

A state business tax credit would now be allowed to be given to companies with fewer than 35 employees.

The bill also would require the state Department of Labor to draw up new guidelines for cracking down on employers who misclassify workers as independent contractors to avoid paying unemployment insurance taxes.

Another bill approved would allow schools to shift 5 percent of an account funded by property tax funds to help offset a portion of the budget cuts. They could shift an additional 5 percent for operating expenses if they did not give salary increases to most teachers next school year.

Schools could give so-called step-up increases that provide more money for many teachers for each additional year of experience as long as they did not exceed 2 percent of their salary.

“It has been a long journey,” Rep. Greg Porter, D-Indianapolis, said of the bill. “It helps avoid teacher layoffs and program cuts.”

Lawmakers had earlier approved legislation to tighten lobbying and ethics rules, and legislation that will allow voters to decide in November whether to amend property tax caps into the state constitution.

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