Niki Kelly has an article on the property tax debate before the Senate Rules and Legislative Procedures committee. A new wrinkle is the idea of eliminating property taxes on homesteads only – leaving farms and businesses subject to the tax. Self-promoter Eric Miller was there to present his plan which would require jacking up the sales tax to 9.4% or the income tax to 13.5% or some combination thereof. Miller claims the increases would be less, but his numbers aren’t very well defined and don’t seem to add up — see, e.g., an unidentified business tax increase of about $1 billion and “administrative savings.” Under his plan, business share of the tax burden would drop from about 33% currently to about 19.9%.
Let’s just drop the property tax elimination crap. It’s not going to work. There is no compelling reason for such dramatic increases in other sorts of taxes just to eliminate property taxes. It amounts to a substantial tax shift without a substantial justification. There is a contingent out there who want to threaten to hold their breath until the General Assembly agrees to property tax elimination. Some figure to use such threats as a negotiating stance, hoping to leverage a more favorable outcome. The legislature should tell those folks to go pound sand and shut them out of the debate. If they won’t negotiate in good faith, they shouldn’t have a place at the table. If the General Assembly manages to reduce property taxes enough, the average Hoosier isn’t going to give a hoot for these zealots and, with some luck, they’ll be rightfully marginalized.
Here is the basic template:
Step One – Require that all state mandated expenses be paid from the state general fund.
Step Two – Pare down local government as reasonably necessary and possible.
Step Three – Consider reinstating the inventory tax.
Step Four – Raise local income taxes modestly.
Step Five – Raise sales taxes modestly.
Step Six – Reduce property taxes.
In addition, the General Assembly should consider seeing whether property tax spikes were far higher in some localities than in others. Targeted action would be appropriate in those cases. For example, if Marion County’s property tax increases were a lot higher than the average county, maybe Marion County’s income tax needs to be raised higher.
Agreed. One of the factors in all this is simply the old “somebody elses back yard not mine” attitude, that is, let someone else pay the bill. A short coming of that is whether you pay for something direct or indirect in that if businesses are paying then the price you pay for goods or services must include all costs they pay–or else the business can not continue to exist. So would you rather know what is being paid in taxes or have many “hidden” taxes. A side point might be that if we do not know how much is being paid then how concerned will we be about government spending.
Many proposals currently before the legislature are going to make attracting and perhaps even retaining some businesses very difficult.
Hmmm… jacking up my income taxes in order to save a couple grand on property taxes for my modest, sensible house? No thanks. I currently live a quarter mile north of the Ohio River. If this went through, I would just move a quarter mile south of the river.
I don’t think this is exactly true since it doesn’t take the profit margin of the business into consideration. If the business is making a profit, and there is enough competition to make raising prices difficult, the tax might come out of the shareholder or owners’ pockets as opposed to the pockets of the consumers.
Agreed only to the point of the short run but basic economic theory says that in the long run all costs must be passed on.
I totally agree that elimination of the property tax is foolish.
The sales tax is regressive. The income tax has loopholes that you can drive a Hummer through.
The property tax is relatively progressive, and it is relatively easy to implement. For all the problems with assessment, the sale price of homes is public record. It’s not that hard to do regression analysis to determine trends over time and to update assessments as a result.
The best thing about property taxes is that they’re levied locally. You’re not sending your money to Indy and then hoping that they send it back.
I don’t support raising sales or income taxes for any reason. If you have a problem with your property taxes, lobby your local government to lower it.
I think you can make a sales tax either progressive or regressive, depending on what you exempt.
Exempting food and clothing would have the effect of making it more progressive, I think.
Rev. AJB says
I agree with Parker in removing sales tax from basic clothing (not party dresses, tuxs, etc.) Also exempt text books for students. Minnesota had this sort of a system, and it was nice for a grad student trying to get by on part-time jobs; like me.
Local governments really need to make the cuts. T, such a system (getting rid of property taxes for sales tax) would hit you harder because I’ll bet your tax rate on that modest home are low. I live in a county with high tax rates; where even modest homes pay very high taxes. Our local governments up here would love nothing more than to shift the burden without cutting the pork.
Time to go on a diet, folks!
Rev. AJB –
I’m not advocating anything, really – just pointing out that exempting necessities from sales tax has the effect of having people who spend more pay more of the tax.
Since these are (typically) wealthier people, that makes such a tax more progressive.
So, I’m just trying to clarify terms, rather than recommend any particular tax policy.
Just a questioning observation—many say local government should cut spending. The question is what and where—no doubt every governmental unit as with ever business or household has somethings they could trim out (live without) but keep hearing cut—cut—cut without much directive—-public safety (police, fire, ems), administration (town, city, county) and where bookkeepers, inspectors, computers, computer programs, roads–maintenance, snowplowing,etc. etc……what programs and people would you cut from the local school system and what pay for teachers—- could go on and on but in a state where local public employees and officials are very low paid compared to business where are the meaningful cuts that will allow reduction of $10,000s of dollars or even a million. And, please none of the “if they don’t like the pay let them leave”—the job still needs to be done and doing it on the cheap is not always financially sound.
Rev. AJB says
Jack-I just know that up here in Lake County–and probably in Marion County, too–there’s a lot of bloated government that can be cut. I mean the Gary mayor just hired his own son to be the “city photographer” for $20,000/yr. Is that really needed?
Rev. AJB says
Parker-point taken. Thanks for the clarification.
Where can we cut? Where do I begin?
Eliminate townships. Consolodate school districts, towns, cities, maybe even counties (Lake and Porter Counties could combine and still be smaller than our neighbor counties in Illinois).
How about a county wide police force? Fire department?
Then you have the outsourcing opportunities. Water and sewer can be provided by a private company.
Let’s benchmark. The cities of Whiting, East Chicago, Hammond, and Gary have INSANE levels of staffing relative to other municipalities in Lake County, much less the rest of Indiana or even other states. Why does there need to be so many public employees?
Why do public employees have pensions? Eliminate that for HUGE savings.
It’s like shooting fish in a barrel.
I’ve found it best to be against whatever Eric Miller is for.
I concur with Joe. If Miller is pushing it, you can bet it’s to aggrandize himself and NOT with any intent of it becoming law.