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Letter to the editor: 3 things Legislature can do to grow Indiana's economy

Thursday, November 21, 2013 - 12:01 am

The by now well-worn cliche says: “Government can do little to create jobs, but it can create an environment that allows private companies to grow.”

Over the past few years, Indiana has taken this advice to heart and worked to improve the business environment by reducing corporate taxes, enacting a moratorium on new regulations and even instituting right-to-work legislation. However, in spite of these efforts, Indiana continues to contend with a stubbornly high unemployment rate. Too many Hoosiers are struggling to get by.

Here are three proven, low-cost and effective strategies to improve the economy.

1. Bond Indiana’s unemployment debt.

In 2008, Indiana began borrowing money from the federal government in order to make up for a shortfall in the Unemployment Trust Fund, the fund used to make unemployment payments. In 2010, Indiana’s debt related to unemployment topped out in excess of $2.2 billion. The repayment plan for the debt – as dictated by the federal government – calls for Indiana employers to pay $63 per employee per year until the debt is eliminated. This rate is higher than any other state and amounts to between $150 million and $200 million in economic activity removed from Indiana’s economy annually. Issuing a bond for this debt will reduce the burden on employers, contribute to the state’s economic activity and – as an added bonus – remove the tentacles of the federal government from Indiana’s unemployment fund.

2. Create a work-sharing program.

Workshare programs allow employers to reduce their workers’ weekly hours and pay on a temporary basis instead of issuing layoffs during difficult economic times. With a workshare program, employees keep their jobs and benefits during such a time, and a portion of their lost wages is made up by unemployment compensation. Employers benefit, because the program allows them to the keep experienced and trained workers who will be needed when business conditions improve. Indiana would benefit by lower unemployment costs and by keeping more Hoosiers employed. Germany has successfully used workshare programs since the 1920s, and the program saved 235,000 jobs in 2009.

In the U.S., 26 states and the District of Columbia currently utilize workshare programs.

3. Initiate a Personal Property Tax Holiday.

Indiana businesses currently pay taxes on every hard asset they own.

Machines used in production, computers and desks in every office — even staplers — are subject to an annual personal property tax paid by businesses. This cost directly impacts Indiana’s economy because it acts as a disincentive to business investment. By taxing the means of production, Indiana is limiting new growth and stifling employment. Indiana’s personal property tax is higher than that of most states; in fact, it is the sixth highest in the nation. 12 states have no personal property tax at all. By creating a two- or three-year tax holiday, Indiana will create an incentive for businesses to immediately invest in new and updated equipment while limiting the effect on tax revenue.

While Indiana is working hard to improve business conditions, more can and must be done to get Hoosiers back to work. The above suggestions have all been successfully utilized in other states, and each has proven cost benefits. By adopting a continuous improvement attitude and implementing proactive initiatives such as these, Indiana can develop the momentum needed to reach economic stability.

Mark Hagar owns several small businesses in Indiana, and he recently announced his intention to run for state representative in the 84th District.