Opinion: Economic Development that Is Worth It

Aug 25, 2016

Credit Andrew Downs / Indiana University-Purdue University Fort Wayne

Businesses in Indiana pay a property tax on non-real estate items owned by the business.  These include things like manufacturing equipment and tools.  In many cases the businesses apply for, and are given, tax abatement on new equipment.  This abatement is a tool used by communities to encourage economic development.

Fort Wayne City Council Member Jason Arp has INTRODUCED an ordinance that would eliminate the business personal property tax in Fort Wayne and Allen County.  Arp consistently has voted against tax abatements on business personal property taxes because he believes that the tax should not be collected in the first place.  He has said that the city council should be creating a level playing field, not picking winners and losers.  He believes that eliminating the tax will make Fort Wayne and Allen County more attractive to businesses and that the increased investment could make the elimination of this tax revenue neutral.  He also has said that if the move is not revenue neutral, then income taxes could be raised to offset any lost revenue. 

Arp is not the first person to call for the elimination of a tax as a way to improve the business climate and he is not the first to question the usefulness and effectiveness of tax abatements as an economic development tool.  At times, this discussion has resulted in strange alliances.  For example, fiscal conservative groups and labor organizations have agreed on a call for the elimination of tax abatements, but for different reasons. 

Arp’s proposal brings up four important topics for discussion. 

First, what businesses do we want to locate and grow in our community.  Historically, this conversation focuses on existing strengths such as the orthopedic and defense industries or advanced manufacturing.  Other times the discussion is about creating a general environment that allows any business to succeed.  These approaches are not mutually exclusive, but they also are not in complete harmony either.  Priorities will have to be established. 

Second, who do we hope will choose to make our community their home?  An increasingly common job search strategy is to identify the place where you want to live first and then worry about finding a job second.  What can be done to make our community a place people choose to live?  Not all places and features in a community are equally appealing to all people.  Prioritization will have be central to this as well. 

Third, what services will the government need to provide in order to attract those businesses and people.  There are some givens like roads and public safety, but even those can vary in quality and quantity which will affect the cost of those services.  More priorities will have to be established. 

Fourth, how should we pay for those services?  Given state laws, our options here will be limited, but we will have some options. 

There will be disagreements and they will come from differences of opinion about the role of government and the effectiveness of the options.  In other words, there will be disagreements about what to do and how to do it.  Complicating things further is the fact that there are many local governments (never mind state and federal) that will need to cooperate and coordinate their activities if this is to be done most effectively. 

Ideological differences, existing laws, fiscal realities, geography, electoral politics, and other factors will present their own challenges.  In spite of this, these are topics that are worth discussing.  It is discussions like these that provide a vision for the future. 

Andrew Downs is Director of the Mike Downs Center for Indiana Politics at IPFW.

Opinions expressed in this column are those of the individual writer and do not necessarily reflect the opinions of the staff, management or board of Northeast Indiana Public Radio. If you want to join the conversation, head over to our Facebook page and comment on the post featuring this column.