A Citizen's Guide to Indiana

State leaders united to urge local communities to raise taxes. They didn’t use those words, of course.

Referring to three local income taxes authorized by the General Assembly, two of which limit or reduce property taxes, Gov. Daniels, Senator Long, and Rep. Bauer said:

Local government has been given an unprecedented opportunity to cut property taxes in record amounts, and it must act today. We are encouraging all Hoosier citizens to contact their city and county councils and urge them to begin the process to cut their property taxes now.

Neat idea – let’s have local government officials take the heat for raising taxes. We won’t mention that part of it. We’ll just talk about “property tax cuts.” This dovetails nicely with Gov. Daniels’ habit of blaming the property tax increase on local government run amok, nevermind that this is not actually the case.

I’m not totally opposed to the idea of replacing some property taxes with income taxes — so long as the swap isn’t structured so lower income people end up footing more of the bill. But, I’m a little irritated at how shabbily local government is treated by the State. I know crap flows downhill and all, but there ought to be limits.

Looks like Tracy Warner, of the Fort Wayne Journal Gazette, couldn’t stay away from blogging entirely. He is authoring a blog called Indiana Tax Facts. (h/t Indiana Law Blog). One entry he has up is called Replacing property taxes.

There has been a lot of talk about taking away the property tax and replacing it with something else. That sounds like a pretty good idea, but becomes less so when you start doing the math. Apparently Sen. Ford has developed a program to do just that in order to analyze what would be necessary to replace the $5.65 billion in property taxes produced in 2006.

Using Ford’s calculator, Indiana would have to raise its sales tax to a nation-leading 8 percent plus dearly double income taxes from the current 3.4 percent to 6.4 percent – an increase of 88 percent – plus, for good measure, raise the corporate adjusted gross tax from the current 8.5 percent to 9.5 percent.

And those increases don’t replace local income taxes, which stand at 1 percent tax in Allen and some other counties.

For someone making $50,000 a year, the increase in the income tax alone would be $1,500. For someone making $75,000 a year, the increase would be $2,250. How many people with similar incomes would end up paying less than they do in property taxes?

The money is coming from somewhere. Folks ought to figure out whether they’ll do worse or better under a new system. If they’ll be doing worse, they’ll want to figure out whether their generosity is warranted.

[tags]Indiana property taxes[/tags]