BE CAREFUL WHAT YOU WISH FOR
Every time some asks me if I favor getting rid of property taxes, I tell them no. I’m in favor of getting rid of the government that’s responsible for the property taxes. On the road to reform those who have yelled the loudest are those seeking the elimination of property taxes, there are a number of plans to replace the revenue; the problem with those plans is that they don’t work.
To eliminate property taxes in Indiana, you would have to find an extra $6 billion somewhere else. Proponents argue raising the state sales and income taxes; capping levy growth and having the state take over some functions currently funded by property taxes like schools and child welfare. Let’s walk through each of these.
To replace property taxes with sales and income taxes every expert says you have to raise the respective tax rates to about 15%. Now you can lower the rate if you are willing to broaden the base and tax items that currently aren’t being taxed: professional services, food, all retail purchases. And there would also be a distribution issue. Should counties get back all the money they send to Indianapolis in the form of taxes or should the state keep the money and distribute it where it’s needed most?
Capping the levy is a good idea. But a better idea would be to reverse the way levies are done. In Indiana local governments set their budgets that become the levies. There are some controls, but what this boils down to is the government setting its budget on what it wants to spend. This is the equivalent of your child basing their allowance on how much they want to spend that week.
And finally, there’s the control issue. If the state takes over schools and child welfare, then the state gets to make all the decisions and the locals are out of the loop. If you don’t think this is a likely scenario, might I suggest you take a long look at Lucas Oil Stadium. I also find it interesting that the further Hoosiers are away from Indianapolis, the less they tend to like the mandates that come from the Capitol. So if you think some folks are grouchy now, just wait.
To solve the property tax problem, I go back to my old premises, there is too much government and too much spending in Indiana. There are too many taxing districts, too many counties, and too many elected and appointed officials. If you want lower taxes, you have to have less government to go along with it. Property taxes are not evil. There is certain logic to the land helping pay for benefits it receives. Schools, police, fire, roads and sewers are all paid for with property taxes. And if you reform the government, you can get the tax relief.
