Combating the Lies

The next time you run into one of the "repeal the property tax" loons, maybe this blog post will come to mind.

We've previously discussed the lunacy of exempting accumulated wealth from taxation. But that is a philosophical question best debated elsewhere.

Today's post will try to lay out facts, not philosophy. The squealing pigs who have been evading their fair share of the tax burden for the last several years have been empowered by the media (who are always looking for a new 'story') as their property taxes were, at last, equalized with yours and mine. That some people saw their property taxes rise has masked the facts.

If you've been living in the same state and particularly in New Albany as long as I have, you certainly can't say that the level of services we receive from our local government is luxurious or exorbitant. There are no bells and whistles. Hell, there are hardly basic services being delivered. Our police force is woefully understaffed, making each of us prey for opportunistic crime. Our property values are diminished by unpaved and flooded streets, eroding infrastructure, and drug dealers who have little fear of being caught. Why, some don't even fear to invite the police into their stash rooms!

So what's the real situation with Hoosier State tax burdens. Well, according to the Tax Foundation, things aren't nearly so bad as the pigs would have you believe.

In 2007, Indiana ranked 30th in the nation in the level of its tax burden. That includes all taxes - federal, state, and local. One can assume that the federal tax burden is pretty evenly spread across the nation - Hoosiers don't have a magic elixir that enables us to have lower taxes than the residents of other states.

30th in the nation. How then does anyone fall for the lie that we are overtaxed locally? The fact is we aren't.

But how about the trend? On average, over the past ten years, Indiana has ranked 30th. On average, over the past five years, Indiana has ranked 30th. Sure doesn't look like a trend to me.

You may ask, "Who is the Tax Foundation?" They're hardly "tax and spend" liberals. Created in 1937 as a reaction to FDR's New Deal, they deal solely with the facts as they find them, with a bias toward lowering government spending. One of their principles is tax neutrality.

Local government taxation is already limited, and severely. Even if we were able to increase the tax base, existing law prohibits local government budgets from growing more than 4.3% a year. Imposing additional caps is not the answer. In fact, government investment in economic development, adequate policing, codes enforcement, and infrastructure will increase our property values while lowering our tax burden as a percentage of our accumulated wealth. Government spending can't grow, but the tax base can.

The loons have it bass ackwards. Investment is what will lower taxes. The ideologues who want to cap property taxes are only trying to shift the burden onto businesses and consumers. The landlords behind all this are asking the legislature to give them a 33.3% tax abatement, preferring their businesses over others. An added penny on the sales tax will put Indiana retailers at a further disadvantage competitively and will drive businesses with options to neighboring states or put them out of business altogether.

There is nothing neutral about the current property tax "reform." It is dangerous and we'll all live to regret being gulled by the volume of nonsense being bandied about in this election year. Call or write your legislators and let them know how you feel about it. It's not too late.

In New Albany, these are your representatives:

Rep. Bill Cochran or Sen. Connie Sipes

200 W. Washington St.

Indianapolis, IN 46204

Call Bill toll-free at (800) 382-9842. His e-mail address is h72@in.gov.
Call Connie toll-free at (800) 382-9467. Her e-mail address is s46@in.gov.

Tribune Twists the Knife?

Eric Scott Campbell, the intrepid reporter for The Tribune, couldn't resist twisting the knife in today's news report on city business. And he wasn't the first to make a comment to me about the remarkable coincidence of Wednesday evening's schedule of events.

It seems that the city council discovered that tonight was the only night they could possibly hold their rescheduled meeting. Is it just a coincidence that the mayoral forum being hosted by Develop New Albany will be taking place just across the street at the same time? Could council president Larry Kochert have taken into consideration that most of the same people who attend and monitor council meetings would be interested, if not obligated, to attend the candidates forum?

But that's not the only news impacting local government this a.m. Gov. Mitch Daniels revealed his master plan for "property tax 'relief'" on Tuesday, and it's a doozy.

Now, I'm usually pretty perceptive. With a little study, I usually "get" it. So the Daniels plan seems to be an overreaction of the greatest magnitude.

There is so much to say. While it is a statewide issue, it will have tremendous ramifications for local government and the provision of services. But what's the truth underlying this move?

As I understand it (and please correct me if I'm wrong), local government revenues cannot rise more than 4% per year - check that - property tax revenues (general fund) cannot rise more than 4.4% per year. Yet, The Tribune wrote today that the average property tax bill rose by 24% this year, attributing that number to the Associated Press.

NOTE TO TRIBUNE EDITORS: Are you sure you didn't get that number from an anti-tax advocacy group that is making New Albany its Southern Indiana home? Isn't 24% a cooked-up number? How is it possible for the average property tax bill to go up by that much while total revenues are under a Proposition 13-like cap? I've tried to do the math. Theoretically, if 50% of the people saw their tax bills rise 100%, while the remaining populace saw their taxes go up zero percent, you could get that "average." But tax collections (local government revenues) would then have to rise by 24%. So which is it? Did taxes go up 24% or 4.4%? I think I know the answer, but I'd love to hear The Tribune's answer.

So here's Mitch's plan.

Cap owner-occupied residential property taxes at 1% of value (no exemptions? no credits?). Residential properties not occupied by the owner would have a tax cap of 2% of value. Business and commercial properties' taxes would be capped at 3%.

As a matter of basic equity, I'm down with the idea of a 1% cap on property taxes for homes where the owners live. I'd actually be OK with a cap of 2%, provided that a commensurate level of service were provided, but a constitutional amendment would prevent any local government from using property taxes to create a superior city or county.

For the next two categories, I'm attracted to the idea of treating rental properties as the businesses they are. We have no public interest in promoting or subsidizing investment in rental properties over job-creating businesses. We certainly don't have that interest in New Albany. Why would rental properties be subsidized? What greater value do such businesses bring to a community that justifies giving them a tax abatement? Is the fact that Daniels' political supporters are more likely to OWN rental properties a factor in the governor's proposal?

But that's not the end of the Daniels plan. By 2009, he proposes to raise the already regressive sales tax by another penny on the dollar, to 7%. I'm not inalterably opposed to tax increases, but the idea of imposing them on sales is, in the final analysis, a way to take a larger share of tax revenues from those least able to pay them.

In the interests of protecting the assets of those who have accumulated wealth, the governor proposes to increase taxes on the poor. For that reason alone I oppose his plan.

Now, I understand that the consumer who elects to spend her money on a flat-panel HDTV will be paying 7% sales tax. But so will the single mom buying milk to feed her children. And the "benefits" are far outweighed by the costs. We shouldn't be imposing the costs on those least able to pay, and the Daniels plan does that, all in the name of a false emergency.

Now that wealth-holders are seeing their wealth accurately taxed, they are marshaling their political forces to panic officeholders into passing emergency measures. In reality, property taxes can't have risen. There is literally no place for those revenues to go.

Indiana is a state with many borders. Here in Southern Indiana, consumers have a ready alternative to paying 7% sales tax - shop in Kentucky. I guess it would only be fair, since we are milking the Bluegrass state's gambling dollars with our casinos, but if ever there was a measure designed to drive retailers out of the state, especially merchants on the border of Kentucky, this is it.

One would expect Sipes, Stemler, Cochran, et al, to be leading the charge against this ill-conceived plan. Yet, to read the literature put out by Sipes and Cochran, they are being stampeded into the "property tax relief" herd. Joining with the city's own Steve Price and mayoral candidate Doug England, our representatives are panicking, pandering, or punishing the poor. And trying to drive business away.

And that's the view of Shadow5.

P.S. Didn't the legislature just give local governments the "freedom" to impose local sales taxes or local income taxes to make up for declining revenues? Doesn't this new "relief" effectively cripple the cities and counties who might have considered a local option sales tax?