Indiana’s Business Tax Climate: Not a Perfect One, But a Good 10

We’re No. 10! We’re No. 10! Not exactly the rallying cry one is used to hearing, but a refrain that deserves more plaudits than usual. Here’s why Indiana’s ranking in the Tax Foundation’s 2011 State Business Tax Climate Index is noteworthy:

  • It’s not easy to make substantial improvements in this area. Indiana has ranged between No.12 and No. 14 over the last five years
  • The top eight seemingly head the list by default as they do not impose one of the big three taxes (sales, income or corporate income). So, without too much of a stretch, you could say Indiana is second on the list
  • We’re far away from the bottom 10; in order from No. 50, that’s New York, California, New Jersey, Connecticut, Ohio, Iowa, Maryland, Minnesota, Rhode Island and North Carolina

The Indiana Chamber’s advocacy efforts certainly are contributing factors to the state ranking. Historic tax restructuring in 2002 (including elimination of the inventory and corporate gross receipts levies) is among the Decade of Policy Victories document reflecting major legislative accomplishments from 2000-2009. The Chamber has also achieved success in general property tax reductions and an expansion of a variety of tax credits (good for business, but not earning high marks in this report).

According to the Tax Foundation, the worst tax codes tend to have:

  • Complex, multi-rate corporate and individual income taxes with above-average tax rates
  • Above-average sales tax rates that don’t exempt business-to-business purchases
  • Complex, high-rate unemployment tax systems
  • High property tax collections as a percentage of personal income

Indiana’s rankings in the five categories are: corporate tax index, 21st; individual income tax index, 11th; sales tax index, 20th; unemployment insurance tax index, 12th; and property index, 4th.

Since this tax analysis game is not for the faint of heart, a little more from the Tax Foundation on how it all works.

The methodology of the State Business Tax Climate Index is centered on the idea of economic neutrality. If a state’s tax system maintains a “level playing field” for businesses, the index considers it neutral and ranks it highly. However, each state’s final score depends on a comparison with the other 49 states.

The overall index is composed of five specific indexes devoted to major features of a state’s tax system. Each of these five indexes is composed of several sub-indexes.

Each state’s laws and tax collections were assessed as of July 1, 2010, the first day of the 2011 fiscal year. Newer tax changes are the subject of commentary in an appendix but are not tallied in the scores and rankings.

The Tax Foundation has data charts, further analysis and a full 60-page report. By the way, you have to go west for most of the rest of the top 10 (in order): South Dakota, Alaska, Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware and Utah.

And finally, going into a state budget year that will bring pressure to raise revenues, let’s all keep the vital importance of the tax climate in mind on business attraction and expansion decisions.

Pelosi Facing Bite from Blue Dogs?

The Democratic Blue Dog Coalition has been a rather enigmatic lot in recent years. And its members get grief from liberals for being too conservative and/or too corporate, yet Indiana’s Blue Dog Congressmen (Brad Ellsworth, Baron Hill, Joe Donnelly, etc.) are constantly blasted in the conservative blogosphere for being — pardon me for this — "lapdogs" for the Obama administration.

But now, it seems Speaker Pelosi may be taking genuine heat from this caucus. Roll Call explains:

Speaker Nancy Pelosi (D-Calif.) has made passing a jobs agenda her top priority this year, but an anti-deficit insurgency led by Rep. Stephanie Herseth Sandlin (D-S.D.), the administrative co-chairwoman of the fiscally conservative Blue Dog Coalition, has forced Pelosi to scale back her ambitions.

With concerns about deficits rising and rank-and-file Democrats fearing losses in November, Blue Dog clout has soared in recent weeks, and liberal priorities from health care benefits for the jobless to tens of billions of dollars in aid to the states have ended up on the chopping block. In the tumult, Herseth Sandlin has emerged to head a new generation of Blue Dogs as old-guard members such as Rep. John Tanner (D-Tenn.) are heading for the exits or lowering their profiles.

The pivotal moment came shortly before the Memorial Day recess, with Pelosi planning to push through a nearly $200 billion package of tax cut extensions, doctor payments, jobless benefits and state aid. But Herseth Sandlin warned the measure didn’t have the votes and would have to be trimmed significantly.

“While we’ve been invited to share our concerns and leadership has listened, not everyone is hearing us,” she told reporters at the time.

Within a day, Democratic leaders were forced to carve their bill nearly in half in a mad scramble for votes.

And this week, the leadership’s plans for a war spending bill had to be cut back in the face of demands from Blue Dogs that add-on aid for states and money for the Pell Grant program be fully offset. The bill will include just $10 billion to prevent teacher layoffs — less than half the amount sought by leadership and President Barack Obama…

Blue Dogs won another victory in this year’s budget battles by extracting a $7 billion cut from Obama’s budget request — a level that will likely force cuts to some domestic spending programs treasured by liberals.

So what do you think? Genuine uproar within the party that could alter its platform, or just contrived friction that will ultimately mean nothing?

UPDATE: Also discovered this article, contemplating a possible Blue Dog coup to overtake Pelosi’s speakership. Doesn’t seem likely, but an interesting thought.