Fort Wayne City Council will reconsider proposal to eliminate business equipment tax
City Councilman Jason Arp will try again to eliminate local taxes on new business equipment less than two years after council defeated a similar attempt.
Arp., R-4th, has introduced a resolution calling on City Council to ask the Allen County Income Tax Council to approve a blanket exemption on taxes for equipment purchased after the proposed effective date of Jan. 1, 2019. The tax council includes representatives from various local governments, but because of the city’s population City Council has the authority to eliminate the tax for the entire county.
City Council is already able to temporarily reduce taxes on new business equipment, but Arp regularly votes against such abatements on the principle that government should not pick “winners and losers.” By eliminating the tax entirely, he believes, favoritism would be removed and all businesses would be treated equally. Council was given the authority to rescind the tax county wide by the Indiana General Assembly in 2014.
Council ultimately decided not to do so, however. At the time the tax generated about $51 million county wide, including about $15 million for the city and more than $10 million each for the county and Fort Wayne Community Schools and less for other taxing districts. Revenues from the tax would have diminished gradually over a decade or so as old, taxable equipment was replaced with new, and Arp said at the time he believed economic growth would offset the lost revenue. But it was a risk council ultimately was unwilling to take.
Arp said that since then studies have indicated that tax incentives targeting individual companies don’t help the overall economy and may in fact hurt it, while across-the-board tax relief that “obeys the rule of law” benefits it. According to Arp, Indiana’s total effective tax rate on mature capital-intensive manufacturers is 19.2 percent compared to 5.1 percent in Ohio3 in Michigan. Reducing or eliminating that disadvantage against nearby states would help attract jobs and investment to Indiana, Arb said.
City Councilman John Crawford, R-at large and a likely mayoral candidate next year, said in 2016 he could support the proposal if changes were made to compensate for the lost revenues. Council has increased the local income tax since then, but Crawford said he had not had time to study or consider Arp’s latest attempt. “The theory is good, because we’re doing it anyway (through abatements),” Crawford said at the time.
A public hearing could come May 22, and a vote could come in June, Arp said.