Indiana Positioned for Post-Recession Economic Bounce
E. Mitchell Roob, Indiana Economic News



The past few weeks have provided fresh evidence that Indiana is positioned to emerge from the global economic recession more successfully than many of our Midwestern neighbors. Recently, national media organizations and interest groups have highlighted government policies and business costs in our neighboring states that they maintain will hurt businesses struggling to recover from the recession.

Facing a billion dollar budget deficit, Illinois Governor Pat Quinn has proposed raising both
that state’s personal and corporate income tax rates by 50 percent. The personal rate would jump from the current 3 percent to 4.5 percent and the business tax would climb from the current 4.8 percent to 7.2 percent.

Michigan is struggling with the impact of the recently enacted Michigan Business Tax, which taxes both business gross sales and profits and is topped off by a 22 percent surcharge. The tax has become a lightning rod for criticism in Michigan by small business owners, some of who complain that their taxes have tripled.

Ohio businesses are some of the most heavily taxed in the nation, according to the nonpartisan Tax Foundation. Ohio ranked 47th in the nation in the foundation’s State Business Tax Climate Index, which measures five areas of taxation that impact business: corporate taxes, individual income taxes, sales taxes, unemployment insurance taxes, and taxes on property, including residential and commercial property. By comparison, Indiana ranks first in the Midwest and 14th nationally. Illinois ranks 22nd nationally and Michigan ranks 20th.

Under the leadership of Governor Mitch Daniels, Indiana has worked hard over the past four years to maintain a stable, low-cost base for Hoosier businesses.

Our business tax rate has remained unchanged. We’ve lowered property taxes for business and homeowners and capped business property taxes at 3 percent of assessed value, which provides cost certainty to business. We also continue to have the Midwest’s lowest average workers’ compensation rate and the Midwest’s lowest average workers’ compensation annual premium.

Indiana’s fiscal house also remains strong. We are the only state in the Midwest - and one of only three in the nation -not currently facing a budget deficit. In contrast, Illinois faces an $11.6 billion shortfall in fiscal years 2009 and 2010; Michigan’s shortfall is projected to top $917 million; and Ohio’s deficit may exceed $1.2 billion. Not surprisingly, we’re also the only Midwestern state with a AAA credit rating.

Indiana’s stable economic environment continues to garner national recognition. Just last month Chief Executive magazine, for the second consecutive year, ranked Indiana as best in the Midwest for business. Among specific categories measured by the magazine, Indiana ranked third in the nation in business friendliness, fourth in transportation, and sixth in cost of doing business.

Indiana also ranked first in the industrial Midwest for economic outlook by the American Legislative Exchange Council, a nonpartisan association of state legislators. Indiana ranked far better than other industrial Midwestern states, including Michigan, Ohio and Illinois. The "Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index" ranks the 50 states based upon the relationship between policies and performance, revealing which states are best positioned to make an economic recovery and which are not.

According to Jonathan Williams, co-author of the ALEC-Laffer Index, “the top performing states keep taxes, spending and regulatory burdens low, while the biggest losers in the book tend to share similar policies of high tax rates, unsustainable spending and regulation.”

Indiana’s skilled workforce, central location, low taxes and low business costs will pay dividends as the nation emerges from this recession. While our neighbors struggle with high tax burdens and mountains of debt, Indiana will be poised for aggressive short- and long-term economic growth.

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