Reassessing Tax Abatements
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
A tax abatement happens when a business or industry decides to locate here, or an existing business or industry decides to expand. The business asks the county to forgive all or a portion of its real estate and personal property taxes for a period of time - usually five or 10 years.
The idea is to foster economic growth, which benefits everyone. Generally, a good idea.
And businesses have taken advantage. Taxpayers in Kosciusko County whose applications for a tax abatement on real estate was approved in 2007 for 2008 total $17,509,890.
So it seems to me, with the property tax dilemma lots of municipalities are facing, it might be time to adjust policies with regard to tax abatements, tax increment financing districts and the like.
All over Indiana, local governing entities are talking about having to cut back or reduce services because of a lack of revenue.
Right here in Warsaw, the library has cut back its hours in anticipation of lower revenues.
Other municipalities are talking about reducing the number of cops, firemen or teachers.
Just last week, the City of South Bend released the results of an in-depth, independent audit done by a private accounting firm.
Back in March, state officials said South Bend stood to lose $11.4 million in revenue due to property tax reform. The audit showed the number would be more like $16.6 million.
St. Joseph County officials were told they could lose up to $4.3 million. The study showed they could lose $7.5 million.
There hasn't been an independent audit here. We're just going by what the state says, which is that all the taxing units in the county stand to lose about $240,000.
This means one of two things. Either services are going to have to be cut back, or local taxing units are going to have to somehow make up the difference.
My guess is that there will be an effort to make up the difference.
Now, remember, the state increased the sales tax by 16 percent.
And these days, the average working-class guy is paying four bucks a gallon for gas and enduring higher prices for food and everything else he buys.
Amid this economic climate, how do you suppose local governments are going to make up the difference? By raising income taxes, of course.
So with a growing amount of his income being chewed up by higher sales taxes, fuel prices and food prices, this guy's gonna have to live with a smaller pay check.
It's not a pretty picture.
And frankly, I think government officials should think twice before they abate anybody's taxes for any reason.
Now, I am not averse to tax abatements per se. I think tax abatements are a wonderful tool for attracting business and industry to a community.
They are legitimate economic development tools.
The same with tax increment financing districts where all or part of a businesses property tax is targeted for infrastructure improvements within the district.
So by all means, if a new business or industry is looking to build or locate here, give them the tax break.
But I don't think these things have to be rubber stamped every time an existing business comes hat-in-handing it to local officials.
I understand that if a county has a history of granting tax abatements to existing businesses that it can help attract new businesses.
History is the operative word there. That was then. This is now. The climate has changed and I think the attitude toward tax abatements needs to change along with it.
Seems to me every time a business comes before our county officials seeking a tax break, they get it - as long as they meet all the criteria, of course.
Frankly, I wouldn't mind seeing a moratorium on tax abatements in this county until after we find out how we come out with regard to property tax revenue.
Anytime you talk about tax reforms or abatements, what you're really talking about is shifting burdens.
So when a business expands and you abate it's taxes, it shifts a little of the tax burden away from the business and onto the individual - the working-class guy.
Sure, without the expansion there would have been nothing new to tax and no increase in tax revenue, but so what? In this economy, why not tax it?
It's not like a business decides whether or not to expand based on property taxes.
And later, when we make it through the lean times and the economy turns around and the working-class guy's check is growing instead of shrinking, abate away.
I'm not saying we should do away with tax abatements, maybe just abate them for awhile.[[In-content Ad]]
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A tax abatement happens when a business or industry decides to locate here, or an existing business or industry decides to expand. The business asks the county to forgive all or a portion of its real estate and personal property taxes for a period of time - usually five or 10 years.
The idea is to foster economic growth, which benefits everyone. Generally, a good idea.
And businesses have taken advantage. Taxpayers in Kosciusko County whose applications for a tax abatement on real estate was approved in 2007 for 2008 total $17,509,890.
So it seems to me, with the property tax dilemma lots of municipalities are facing, it might be time to adjust policies with regard to tax abatements, tax increment financing districts and the like.
All over Indiana, local governing entities are talking about having to cut back or reduce services because of a lack of revenue.
Right here in Warsaw, the library has cut back its hours in anticipation of lower revenues.
Other municipalities are talking about reducing the number of cops, firemen or teachers.
Just last week, the City of South Bend released the results of an in-depth, independent audit done by a private accounting firm.
Back in March, state officials said South Bend stood to lose $11.4 million in revenue due to property tax reform. The audit showed the number would be more like $16.6 million.
St. Joseph County officials were told they could lose up to $4.3 million. The study showed they could lose $7.5 million.
There hasn't been an independent audit here. We're just going by what the state says, which is that all the taxing units in the county stand to lose about $240,000.
This means one of two things. Either services are going to have to be cut back, or local taxing units are going to have to somehow make up the difference.
My guess is that there will be an effort to make up the difference.
Now, remember, the state increased the sales tax by 16 percent.
And these days, the average working-class guy is paying four bucks a gallon for gas and enduring higher prices for food and everything else he buys.
Amid this economic climate, how do you suppose local governments are going to make up the difference? By raising income taxes, of course.
So with a growing amount of his income being chewed up by higher sales taxes, fuel prices and food prices, this guy's gonna have to live with a smaller pay check.
It's not a pretty picture.
And frankly, I think government officials should think twice before they abate anybody's taxes for any reason.
Now, I am not averse to tax abatements per se. I think tax abatements are a wonderful tool for attracting business and industry to a community.
They are legitimate economic development tools.
The same with tax increment financing districts where all or part of a businesses property tax is targeted for infrastructure improvements within the district.
So by all means, if a new business or industry is looking to build or locate here, give them the tax break.
But I don't think these things have to be rubber stamped every time an existing business comes hat-in-handing it to local officials.
I understand that if a county has a history of granting tax abatements to existing businesses that it can help attract new businesses.
History is the operative word there. That was then. This is now. The climate has changed and I think the attitude toward tax abatements needs to change along with it.
Seems to me every time a business comes before our county officials seeking a tax break, they get it - as long as they meet all the criteria, of course.
Frankly, I wouldn't mind seeing a moratorium on tax abatements in this county until after we find out how we come out with regard to property tax revenue.
Anytime you talk about tax reforms or abatements, what you're really talking about is shifting burdens.
So when a business expands and you abate it's taxes, it shifts a little of the tax burden away from the business and onto the individual - the working-class guy.
Sure, without the expansion there would have been nothing new to tax and no increase in tax revenue, but so what? In this economy, why not tax it?
It's not like a business decides whether or not to expand based on property taxes.
And later, when we make it through the lean times and the economy turns around and the working-class guy's check is growing instead of shrinking, abate away.
I'm not saying we should do away with tax abatements, maybe just abate them for awhile.[[In-content Ad]]
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