Koch’s Tax Incentive Review Legislation Receives National Recognition

Pew Charitable Trusts Cites Indiana as a ‘National Leader’

Friday, December 4, 2015

INDIANAPOLIS (Dec. 3, 2015) - Legislation authored by State Rep. Eric Koch (R-Bedford) requiring the review and evaluation of state and local tax incentives has been cited by the Pew Charitable Trusts as a national model.

House Enrolled Act 1020 (2014) and HEA 1142 (2015) established a process to evaluate the results of Indiana’s state and local tax incentives in order to inform policymaking.

“Tax incentives given to one group of taxpayers are paid for by other taxpayers,” Koch said. “It’s therefore important that we ensure that tax incentives are evaluated to ensure that they are achieving the desired results in a cost-effective manner and not simply subsidizing activity that would occur anyway.”

In recognizing Indiana for its leadership in developing evidence on the effectiveness of tax incentives, Jeff Chapman, the Director of Economic Development at The Pew Charitable Trusts, said that by enacting HEA 1020, “Indiana became an early adopter of this practice and influenced the actions of other states.”

Chapman also recognized the high quality of the evaluations published by Indiana’s Legislative Services Agency’s (LSA) Office of Fiscal & Management Analysis, and how they informed drafting the HEA 1142 which refined Indiana’s evaluation process and put into practice findings from LSA’s first report. The Legislature used LSA’s research as the basis for repealing two programs that were shown to be less effective than other strategies.

“Indiana has become a national leader in developing rigorous research on the economic impact of incentives,” Chapman said. “In the short time period since the legislation was adopted, the LSA has produced some of the highest quality analysis available in any state. At a recent conference of tax incentive evaluators from 21 states hosted by Pew, LSA staff members were sought after for their expertise and received accolades from other participants for their recent analysis.”

“Tax incentives are important policy choices. If states make decisions based on anecdote, they could waste money that could be better used for other services or broad tax cuts. And by not using effective incentives, states could miss opportunities to create jobs and spur investment. Policymakers in Indiana now have the rigorous evidence they need to make these critical policy choices with confidence,” Chapman said. 

“Many of these incentives operate as automatic features of our tax code and didn't get evaluated in the same way that expenditure programs do," said Rep. Koch. "That will now change," Koch said. “Pew’s expertise is well-regarded around the world and I appreciate them taking note of our work here in Indiana. Indiana has once again led the way for the rest of the nation. 

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Rep. Koch (R-Bedford) represents all of Brown County, most of Lawrence County and parts of Monroe, Jackson and Johnson counties.