Tribune-Star
Indiana's inconsistent and inefficient property tax system is a major problem, and Gov. Mitch Daniels deserves credit for crafting a remedy. But his plan must be intensely scrutinized to make sure it doesn't leave Hoosiers with even bigger long-term problems.
Daniels' idea sounds appealingly simple - cap homeowners' property taxes at 1 percent, and raise the sales tax 1 percent. He's succinctly addressed some of the details as well. To offset lost money for local governments, the state would pick up the full tab for school operating costs and child welfare programs. Indiana's property assessments, which wildly vary from one township to the next, would be performed by one professional assessor per county, instead of the current patchwork of elected assessors. Any significant construction projects by a school district, city or county would have to be approved by a voter referendum. Local government spending could not exceed a county's personal income growth calculated over a six-year period without a voter referendum.
Eyes tend to glaze over while reading each element of the proposal. That is a significant concern about this plan. Property-tax relief is complex. Its future consequences shouldn't be obscured by efforts to ease the crisis of the moment.
For example, the governor's referendum concept needs critical analysis. In many states where voter referendums are required, communities with deteriorating schools struggle for decades to get approval for building or improvement projects. Polling voters each time a community considers constructing a middle school cafeteria or funding a park project contradicts the nation's representative form of government. Referendum votes also cost money to conduct, often attract professional opponents with deep pockets, and could delay urgent ventures.
Daniels wants local government to be accountable and more streamlined, and that is a laudable pursuit. Wisely, he wants a tax board in each county to evaluate and approve (or reject) any spending plan from any taxing body. His call for a single, trained property assessor for each county - appointed by county councils - will reduce the excessive number of assessing entities now in place.
By resisting the politically popular temptation to eliminate property taxes altogether, Daniels also acted smartly. That could have forced the state to rely more heavily on income taxes to fund public services, leaving Indiana fiscally vulnerable in even a mild economic recession.
But shifting a portion of the property tax burden to a sales tax raises concerns, too. Indiana's sales tax would rise from 6 percent to 7 percent. Some groups, such as retired homeowners, come out as winners, especially considering that some of their primary expenditures - prescription medicine and physicians' fees - are not included in Indiana's sales tax. Others, such as young couples who rent, will spend a larger portion of their incomes as they make purchases to build their lives.
Daniels apparently chose not to add services - such as fees for doctors, lawyers, accountants, etc. - into the state's sales tax for this property-tax relief plan. He's also calling for the drastic step of locking in the property tax caps - 1 percent for homeowners, 2 percent for rental property owners, and 3 percent for businesses - through an amendment to the state constitution.
Members of the state legislature have, so far, viewed Daniels' idea with both praise and skepticism. It deserves healthy doses of both.