Governor Mitch Daniels a few weeks ago signed HB 1004, reducing Indiana’s corporate income tax rate from 8.5 percent to 6.5 percent, a decrease of nearly 25 percent.
The measure, sponsored by Sen. Brandt Hershman, will begin reducing the Indiana corporate tax rate by 0.5 percent per year over the next four years to a final rate of 6.5 percent.
“While other states are raising taxes to deal with major budget shortfalls, Governor Mitch Daniels and Indiana’s General Assembly were able to cut taxes and improve our state’s jobs climate, all while passing a balanced budget. Indiana’s business environment already ranks near the top of the pack in most every third-party analysis and this reduction will only strengthen our reputation as a place to invest and create jobs,” said Mitch Roob, Secretary of Commerce and chief executive officer of the Indiana Economic Development Corporation.
Indiana’s corporate income tax reduction comes just four months after neighboring state Illinois increased its business tax burden from 7.3 percent to 9.5 percent, a rate that gives the state the fourth-highest combined national-local corporate income tax rate in the industrialized world, according to the Tax Foundation.
“By reducing the tax burden for businesses we are sending a strong message to company decision-makers from coast-to-coast and around the world that Indiana is serious about competing for their business and will continue to work to make our state the best possible place to grow,” said Hershman.
Since Governor Daniels was elected in 2004, he has taken several measures to improve the state’s attractiveness for business. Among them include:
. Increased R&D tax credit – Provides a tax credit equal to 15 percent of a company’s first $1 million of qualifying R&D expenditures, giving Indiana one of the highest R&D tax credit percentages in the country. (2005)
. R&D Sales Tax Exemption – Exempts purchases of eligible research and development equipment from the Indiana state sales tax. (2005)
. Single Sales Factor Corporate Tax – The single-sales factor apportionment calculates the Indiana portion of corporate taxes based solely on the portion of a company’s sales in Indiana. (2006)
. Major Moves – Indiana is the only state in the nation with a record-breaking, fully-funded 10-year infrastructure improvement plan that includes the construction or renovation of more than 400 roads and bridges – all without raising taxes or borrowing money. (2006)
. Telecommunications Reform – Indiana’s Telecommunications Deregulation Act has made the state a national leader in telecom reform by increasing competition among carriers, resulting in lower prices, new investments and new jobs. (2006)
. Property Tax Relief – Cut property taxes by one third and established a constitutional cap on tax rates for all classes of property. (2008, 2010)
These measures, coupled with years of balanced budgets and fiscal discipline, have earned the state a AAA credit rating from all three bond rating agencies, a first in state history.
The corporate income tax reduction news comes on the same week that Amazon.com cited Indiana’s business-friendly policies as the reason it will open a 900,000-square-foot Internet order fulfillment center in Indianapolis this summer, bringing hundreds of jobs.