Tax Cuts Cross the Finish Line
NFIB, or the National Federation of Independent Business, the leading small business organization in Indiana, thanks the legislature for passing a $1.1 billion tax cut package this session, which ended earlier this week. The legislation reduces Indiana’s income tax rate from 3.23% to 2.9% over the next seven years, making Indiana’s tax rate tied for the lowest flat income rate in the country. While the removal of the 30% depreciation floor for new business equipment was not included in the final version of the bill, the elimination of utility taxes made the cut. Repealing this tax will save all Hoosiers residents and businesses $220 million annually.
“Small businesses are facing the highest inflation levels in 40 years which is being exacerbated by labor shortage, supply chain disruptions, and now the soaring cost of gas,” said Natalie Robinson, NFIB State Director in Indiana. “Our small business owners are pleased that lawmakers took advantage of Indiana’s strong fiscal shape and passed legislation that will put some hard-earned money back into the hands of owners so they can reinvest in their small business.”
According to the latest NFIB Small Business Optimism Index, 26 percent of small business owners nationwide said inflation is the single most important problem in operating their business, the highest reading since the third quarter of 1981
Here are the 2022 priority bills impacting small business in Indiana:
HB 1001, COVID Immunizations – The signing of this bill into law marked the end of the state’s public health emergency and limits employer vaccine mandates. This law provides that employers that choose to require a COVID vaccine to accept religious, medical, and natural immunity exemptions. There are stipulations for each exemption. Given NFIB’s success with its lawsuit against the Biden Administration’s OSHA vaccine mandate which resulted in the U.S. Supreme Court shutting it down, NFIB remained neutral on HB 1001.
HB 1002, Tax Cut Package – This was a priority bill for NFIB in its original form as it passed out of the House, before the Senate gutted it of all tax cuts. While we prevailed at getting the utility tax repealed and the individual income tax rate reduced in the final version, the exact savings to Hoosiers is yet to be determined. That’s because after the first tax cut in 2023, future tax cuts would only occur if state revenue growth reached 2% the prior year. Regardless, the income tax rate reduction will benefit all taxpayers, especially the 85% of small businesses that operate as pass-through entities and pay taxes at the individual rate.
HB 1083, Sales Tax on Services – NFIB testified in opposition and explained to lawmakers how expanding the sales tax to services will disproportionately impact smaller business. The message that a service tax would discourage economic growth and fall most heavily on main street was heard and the bill was defeated. We anticipate this issue coming back next year and will remain vigilant in opposing it.
HB 1153, Workers Compensation – The passage of this NFIB supported bill will cap the cost for medical payments to ambulatory surgical centers which will reduce expenditures for employer’s if utilized under worker’s compensation. It will also increase benefits by 3% each year for four years without increasing employer rates according to the impact study conducted by the National Council on Compensation Insurance (NCCI).
SB 74, Public Works Projects – NFIB supported this bill which has been signed by the Governor. It redefines small businesses as a business with 100 or fewer employees verses 500 or less employees thereby increasing the number of small manufacturing businesses and qualified contractors able to bid on public projects. It also increases competition and helps eliminate favoritism in the procurement process of public works projects.
SB 249, Health Care Transparency – NFIB supported this measure that was aimed at increasing transparency in the health insurance industry. The Senate Health and Provider Services Committee voted 10-1 to approve the legislation, although it died in the House. Lowering health care costs and providing more transparency is a key priority of NFIB. Efforts are already underway to address this issue as NFIB members plan to meet with the Governor’s Public Health Commission on March 21, 2022.
SB 264, Red Tape Reduction – NFIB testified in support of this bill that has been signed by the Governor. It creates a legislative body to review the state’s administrative rule-making procedures to determine where improvements can be made and red tape can be cut. Indiana has 49 state agencies and more than 93,000 rules on the books. In 2021, nearly 700 rules were approved or renewed alone. NFIB plans to work with the newly created task force to share how members have been negatively impacted by rules imposed by state agencies that cost them significant time and money. The goal is to reduce these regulations that impose unnecessary mandates, penalties and fines on small business.
Energy and Environmental Bills: A number of bills were passed by the General Assembly to lay the groundwork for Indiana’s renewable footprint. NFIB monitored these bills to ensure the measures did not impact the bottom line of small businesses. Among those that passed, included: HB 1209, SB 271, SB 411, and HB 1221.