Well, the Legislature has finished its business in Indianapolis. You can all take your hands off your wallets now. The smoke has cleared, and the news is pretty good. Not perfect, by any means, but pretty good.


Lets review the situation we were facing.

1) Over the past two years, Indiana had lost over 110,000 jobs, many of them high paying manufacturing jobs.

2) Our State’s tax structure was antiquated, and anti-business, causing Indiana to be much less competitive than surrounding states when a company was looking to relocate or expand its operations. That meant fewer good jobs for our citizens.

3) There had been little, if any, leadership in our State’s economic development effort, while other States moved aggressively and progressively forward.

4) On top of all this, we faced a court ordered property tax reassessment that threatened to seriously increase property taxes upon our citizens who were already reeling from a tough recession.

5) And, last but not least, the State’s budget was almost $1 billion dollars short of what was needed to pay for its programs.


Here is what happened. As you know, there were proposals on the table to enact sweeping tax changes for Indiana that would have changed our tax laws more in one fell swoop than we had done in the past 100 years! And you know what, that is exactly what happened. The shock is that the Republican plan was, by and large, adopted. And that plan called for:

a. far less new money for the state government than the Governor had asked for, meaning we will have to make up the deficit with a combination of new revenues and significant budget cuts;

b. property tax reform that should not only protect homeowners from the court ordered increase in taxes but actually lower their taxes instead; and,

c. reforming or eliminating some of Indiana’s most hated, job killing taxes.


As a result, we now have a tax structure that is much more helpful in creating new, higher paying jobs; the property tax crisis should be resolved; and our State’s budgetary crisis should be over, at least for now.

The details are as follows:


1. We cut the property taxes used to support the school general fund (which is always the highest hit on our property taxes) by sixty percent (60%). This is significant property tax reform, ie. Creating a system for funding our schools that is far less dependent upon property taxes. Good for homeowners; good for businesses; good for jobs.

2. We raised the homestead credit for homeowners from 4% to 20%. We also raised the exemption homeowners may take before their property’s value can be assessed from $6,000 to $35,000. Each of these changes will help lower your property tax bill significantly.

3. We got rid of the hated inventory tax that has cost our State so many jobs in the past. We were the last state in the Midwest to do away with this tax. It will be phased out over 5 years. Finally!

4. We got rid of the hated corporate gross income tax. Indiana was the last state in the country to have this tax. It was used against us all the time by Ohio and Michigan when a company was considering whether to locate in Indiana or one of those states. It also helped those states steal many of our companies in the past few years.

5. For economic development (spelled JOB development), the following was accomplished:

a. The Research and Development Tax Credit was increased from 5% to 10%.

b. A new venture capital Investment tax credit was created, to encourage entrepreneurship in Indiana like many other states have done.

c. The 21st Century Research and Technology Fund was re-established by providing $15 million per year for high tech initiatives. This money can be leveraged with Federal dollars to create close to $100 million in available funds for start up ventures and important expansions of existing companies.

d. Smart Zones were created, which will establish special high technology parks to promote high tech research and development.

6. Perhaps most significant of all: we created spending caps on both state and local government. This is unprecedented in our state, and was one of the key things I felt was necessary to be enacted if Indiana was to avoid the out of control spending habits that helped create our current fiscal mess. Now, government spending may not increase faster than the average growth in Indiana personal income! This may be the most important thing the Legislature did in the entire special session.

7. The plan will be paid for by the following revenue enhancements:

a. A 1% increase in the sales tax, from 5% to 6%, which still makes Indiana one of the lower sales tax states in the nation.

b. An increase in the Corporate Adjusted Gross Income tax.

c. A 40 cent per pack cigarette tax increase, which makes the total tax .55 cents per pack. To compare, Illinois, Ohio, and Michigan are now close to a $1.00 per pack tax after their own recent increases.

d. An increase in gaming taxes. Riverboats will now be allowed to dock full time, in return for higher taxes.

e. A three cent increase in the gas tax, the first since 1986. Indiana still has the lowest state gas tax in the Midwest, at .18 cents per gallon. All of this money will go to construct and maintain state and local roads. It is a pure user tax.

Could we have done more to help economic development in our State? Yes, but considering the political environment in which we were working, many experts are amazed that anything passed at all. Under the circumstances, getting a pro-growth, pro-job piece of legislation passed that also took care of the property tax crisis was indeed amazing. Will we still face difficult decisions down the road? Yes. Next year’s budget will be extremely frugal, and additional cuts may well have to be made. However, the State needs to learn to live within its means, and the beauty of this plan is that it should force us to do just that. All in all, I think a great deal was accomplished with the least amount of pain.