There are some proposals floating about the State House to ease property taxes by raising income taxes. Specifically the Kenley Plan seems to contemplate raising local option income taxes to get the job done. According to the Association of Indiana Counties, a lot of county officials if the State wants to raise income taxes, it should just raise them itself and not look to the counties to raise taxes.
[L]local officials are well aware that Indianapolis Mayor Bart Peterson was voted out of office last week in part because he pushed to raise local income taxes.
Kenley’s commission, on the other hand, says:
The commission said property taxes pay for local services and that local governments should take some of the responsibility for those expenses by raising income taxes.
I beg to differ. It was the action of State officials that primarily got us into this mess. It was a State Court that ordered the overhaul of our old property tax system. It was the General Assembly that eliminated the inventory tax. It was the General Assembly that structured the trending reassessment process. It was the General Assembly that cut homestead credits and property tax replacement credits to balance the State’s budget. Sure property tax dollars pay for local services. But we’re not building a tax system from scratch here. The changes are all coming from on high, and now State officials seem to want local officials to bear the pain of the changes they mostly didn’t have any say in implementing.
Another problem with setting tax rates at the local level is that many, probably most, local governments are ill equipped to make the difficult policy decisions.
Raising revenue is the obvious side of tax decision, but when it comes down to making the decision, the relative allocation of burden among taxpayers becomes a key factor. Competition with other localities for business and development should also be considered. Most counties in Indiana don’t have an economist on staff, and really would just be guessing at what would be best for their community.
And if the local board makes a decision, they can’t help but wonder whether the legislature will soon enact changes that will negatively impact the effects of the local board’s decision.
I think uniformity is probably better anyway. When there’s a specific public works project (e.g. a stadium) — a unique local project — then a local tax makes sense. But most expenditures at the local level are made as part of statewide, or national systems of infrastructure and service delivery.
Can’t say I disagree with you here. State politicians want all of the credit while taking none of the heat. Good post.
Thanks. Stopped clock and all of that. :)