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Boost Indiana logistics with new tax credit

Posted: Tuesday, January 25, 2011

By J. Mark Howell, president of BrightPoint Americas

For the last three years, the national economy has seen a downward spiral created by bursting bubbles in our housing and financial sectors. We're only now starting to emerge from the recession that followed – too many Hoosiers are still dealing with the burdens of lost jobs and frozen wages.

So it's good news that Indiana's recovery isn't being fueled by financial speculation or an overheated housing market; our economic progress is coming from a more old-fashioned concept – making and moving products. Most new jobs in the state are being created from the manufacturing and logistics industries.

To keep this progress going, lawmakers should be prepared to make a few smart investments during this session of the Indiana General Assembly, despite the difficult budget climate. One way to grow our transportation industry is Senate Bill 222, the Hoosier Transportation and Logistics Tax Credit, introduced by State Senator Tom Wyss (R-Fort Wayne), Chair of the Indiana State Senate Committee on Homeland Security, Transportation and Veterans Affairs.

This proposal would provide a 50 percent tax credit to companies that invest in their logistics operations, expanding or improving truck or air terminals, rail, road, or maritime infrastructure. The credit would also apply to firms making upgrades to comply with federal homeland security requirements, easing the burden of these regulations on Hoosier businesses.

Through Governor Daniels' Major Moves plan, Indiana has been able to continue to make aggressive investments in our public infrastructure even during the recent lean budget years. But it's also important that we incentivize companies to invest in their privately-held infrastructure, encouraging expansion and growing our overall capacity to move freight.

What's at stake with the Hoosier Transportation and Logistics Tax Credit?

Indiana is fortunate that our central location puts two-thirds of the nation's population and businesses within a day's truck drive of our borders. Our logistics industry takes advantage of this fact, and allows our manufacturing sector (which represents more than 25 percent of the state's total economy) to get products quickly into the hands of its customers while capitalizing on efficient supply chains.

Over the last decade alone, Indiana logistics GDP grew 53 percent. Indiana logistics industry wages, from 2001 to 2010, average 15 percent higher than private industry while employing over 310,000 Hoosiers.

These trends continue today, as Indiana ranks 9th among states in logistics employment per capita, and the sector is one of the state's fastest-growing in terms of personal income. The state's exports are likely to approach $30 billion in 2010 (final data are still being gathered). Indiana was among the national leaders in private sector job creation in 2010, driven primarily by manufacturing working symbiotically with a strong logistics sector.

To maintain this position, we need to continually strengthen our infrastructure and promote a pro-growth business climate, both aims of SB 222. Conexus Indiana's Logistics Council, a statewide group of 40+ executives representing the industry, strongly support this proposal.

Just a few years ago, Indiana was hindered by an inventory tax that left us at a competitive disadvantage with other logistics-minded states. The General Assembly showed forethought by eliminating that tax in 2002, opening the door to hundreds of millions of dollars in investment and thousands of new jobs, according to economic development experts.

But we can't afford to rest on our laurels. Indiana is in a fierce competition with other states for economic opportunities in the trillion dollar logistics industry. Surrounding states like Ohio and Illinois are offering aggressive incentives that blunt our geographic advantages. Our top ten rankings in logistics jobs and freight shipping could easily begin to slip if we don't encourage continued growth and investment.

Just calling ourselves the Crossroads of America doesn't guarantee our position as a global distribution hub. We have to be willing to back up slogans with action – by passing SB 222, the Hoosier Transportation and Logistics Tax Credit, this year.

J. Mark Howell is President of BrightPoint Americas. He serves on the Executive Committee of the Conexus Indiana manufacturing and logistics initiative, and chairs its Logistics Council.