Evansville Courier & Press
A preposterous proposal to abolish property taxes in Indiana - without having a plan for revenue replacement - heads a group of tax measures before the Legislature.
Among the others is a Democratic proposal to end the sales tax on gasoline, which would do little for motorists while hindering the recovery of the state's financial standing. More promising is a proposal from the governor to increase cigarette taxes, in order to help Hoosiers without health insurance. Another positive initiative would give local governments latitude in adopting non-property alternative taxes.
But the proposal that should give Hoosiers greatest pause is the one from Sen. Thomas Weatherwax, R-Logansport, and others for a constitutional amendment to abolish property taxes. These are the same taxes used to pay for public schools, public safety (police and fire), libraries and other local government services, operations and projects.
To get a better picture, that's about $5.6 billion statewide that local governments raise from property owners and spend on local needs.
What if Indiana passes this amendment? Would local communities downsize public education? Would they cut firetrucks and police cars? Of course not. They would replace that property tax money with other taxes.
According to a past estimate by the Legislative Services Agency, if the state acted alone to replace property taxes, the 6 percent sales tax would have to be increased to 13.4 percent to make up the $5.6 billion. Or, if the Legislature wanted to go with the state income tax, the current 3.4 percent rate would have to be increased to 8 percent to make up the lost property tax revenue.
Imagine what more than doubling the sales tax would do to retail sales and the economy.
There are three truths that come into play here.
The first is that government is a necessity of a civilized society. As much as people criticize government, it gives them security, comfort and quality of life. (If you disagree, skip the remainder of this commentary and go read the comics page.)
Second, Indiana is already a low-tax state and does not require such drastic action as a complete abolition of property taxes.
Third, and most important, the property tax is the most reliable tax for withstanding the downside of economic cycles. If the economy goes sour, retail purchases decline. A government heavily reliant on a high sales tax could go into the tank. Ditto for the state income tax. In a down economy, people lose jobs and earn less, again meaning a decline in income tax revenues. Property taxes are far more resistant to economic fluctuations.
At a time when Indiana is exploring ways to strengthen public education, do Hoosiers want to gamble on shortfalls in school funding that might come with a down economy?
Granted, the idea of eliminating property taxes sounds terrific. In Friday morning's Question of the Day in the Evansville Courier & Press, 72 percent of respondents said eliminating the property tax is a good idea. But it sounds terrific only until one considers the risky alternatives.
This is not to say that there is no room for adjustment of Indiana's tax structure. The property tax and property assessment systems are woefully complicated and can be unfair. And it could be that Indiana's reliance on property taxes should be reduced.
But there is a difference between intelligently adjusting the balance of taxes and taking a sledgehammer to the whole property tax package, while at the same time hoping that something else will appear to take its place.
According to Courier & Press staff writer Bryan Corbin, Senate Tax Chairman Luke Kenley, R-Noblesville, has doubts as well about the proposed amendment. He said that any responsible plan should include details on how lost revenue will be replaced, so that local governments would not be left guessing how they would fund services in the future.
As Kenley said, "This is kind of jumping off the cliff first."
To that we would add: without a helmet and a net.