A Citizen's Guide to Indiana

Masson's Blog

Pick your poison

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WISH-TV has a poll on whether to repeal the property tax and, if so, what to replace it with.

40% say keep the property tax.
20.9% say replace the property tax with gambling revenues.
14.85% say replace the property tax by increasing the sales tax.
7.7% say replace the property tax by reinstating the business inventory tax.
4.95% say eliminate the property taxes through cutting state services.
3.3% say replace the property tax with local option income taxes.

(A note about my methodology – the WISH-TV poll says that 40% of respondents are willing to keep the property tax. Of the 55% who favor elimination, the poll reported numbers for how those people would replace the lost revenue. I multiplied the replacement percentages by 55% to determine how those numbers fit into the population as a whole.)

I’m not sure we have anything here other than a general sense of not liking to pay taxes. Note that the most popular way of replacing the money is through gambling revenues – which I read as “make those dumb gamblers pay for stuff so I don’t have to.” You have only about 1/4 of respondents who want to replace property taxes with a different tax that the respondent will likely have to pay directly.

I am mildly amused at the headline being run by the Associated Press on the poll. “Poll: Tap state surplus to ease property tax burden.” The recent property tax crisis was caused in no small part by the process that led to the State “surplus” in the first place. The State has recognized that it imposes a good many burdens on local government and, the State helps out by subsidizing local property taxes. In 2005, the State “balanced” its budget, in part, by capping the property tax subsidy. This resulted in higher property taxes. So, the poll is really just saying, apparently, that the State should return to paying higher property tax subsidies.

[tags]property taxes[/tags]

General Assembly budget examined

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Niki Kelly has an excellent article in the Fort Wayne Journal Gazette looking at the budget of the Indiana General Assembly. By and large, the General Assembly operates on the cheap. They get by with about half the average number of staffers. Their accommodations are not luxurious — however, they did get an upgrade in that field within the past 10 years or so. When I was at Legislative Services, the facilities were a little run down. The House “offices” looked like study carrols in a college library. The conference rooms were shabby affairs in the basement of the statehouse – in at least one of the rooms, there were exposed wires in the ceiling. Like I said, they upgraded a bit since then, but still, they aren’t exactly wallowing in opulence.

There is some fat to be cut, however. The House has spent something like $350,000 in outside legal expenses on the House Prayer lawsuit, trying to defend the idea of making sectarian prayer an official part of House business. Putting aside the Constitution and the lessons of history for a second, a quick look at the Sermon on the Mount in Matthew:6 advises against ostentatious prayer. Take the hint and save the State some money. Say your prayers just about anywhere else you want, but keep it away from the Speaker’s podium.

Apparently the General Assembly has found a need to increase the amount of money it spends on its legislative assistants, attorneys and communications staff members. They found they were losing these folks to private practice. I’m one they lost – for that reason among others. On the other hand, I’m happy they paid so little to start since it let me get a job as a very young, inexperienced attorney. But, from the perspective of the State of Indiana, I’m not sure the State is best served where the legislators are counseled by attorneys like me when I was fresh out of law school. Fortunately, there are a number of highly skilled attorneys and fiscal analysts at LSA who have been around for quite a while and are able to provide the legislature (and young attorneys) with pretty good advice. (Yeah, they’re my friends, and I’m biased.)

In any event, it’s a good article that looks at some of the nuts and bolts aspects of running the General Assembly.

Lawyer arrested in court for being drunk

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The Journal & Courier is reporting that a Hammond attorney was arrested at the Tippecanoe County courthouse for being drunk at a 11 a.m. hearing. Peter Katic, 53, was also a state representative in the 70s and 80s.

Katic, a Democrat, served three terms as a state representative, beginning in 1978. He was a Lake County deputy prosecutor when elected. Katic also was a Lake County commissioner in the ’90s.

Katic had a flask of whiskey in his pocket and had bloodshot eyes, a flushed face, and breath smelling of alcohol. He blew a .20.

Folks, the booze can really grab hold of some people. Be careful out there.

Dan Burton: Fearing the Reaper

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I’m no scholar of the Bible, and, I’ll confess I know the verse from Hosea 8:7 mostly from the movie Young Guns, where it comes up a number of times, notably at the end when Emilio Estevez shoots Jack Palance between the eyes and says, “Reap it, Murphy, you son of a bitch.”

The original Biblical version, depending on your translation, says something like:

For they sow the wind And they reap the whirlwind. The standing grain has no heads; It yields no grain. Should it yield, strangers would swallow it up.

Sowing the wind, in this case, refers to the making of a vain show of worship; a spectacle that might fool the gullible, but which will ultimately yield no fruit.

Speaking of vain shows of worship, enter Dan Burton (h/t Blue Indiana).

Saying America is “moving in a very, very wrong direction,” Indiana Rep. Dan Burton says he will introduce legislation mandating that “In God We Trust” be retained in a prominent place on U.S. currency and coinage.

“Recently, there were thousands of coins minted without ‘In God We Trust’ on them, and now they’re talking about putting ‘In God We Trust’ in an obscure place on coins so that people can’t read it, right on the edge of the coin,” the Republican complains.

Practically preaching from the pulpit, the congressman warns that “once you start turning your back on the good Lord, I think you are going to reap the whirlwind, and this is something this nation cannot afford to do right now.”

As Thomas at Blue Indiana points out, Burton is fiddling while Rome burns if he’s spending his limited time between rounds of golf obsessing about the design of our coinage. Just who is sowing the wind here? Rumor has it there is real work to be done, and now is not the time for meaningless spectacles of piety. Unfortunately, even if it’s Dan who is doing the wind sowing, it’s the common citizenry who will get the brunt of the whirlwind.

Swiftboat Robocaller loses another round

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Swiftboat mastermind, Bob Perry, loses another round in his effort to robocall Hoosiers with his campaign propaganda. Perry funded something called the “Economic Freedom Fund.” The Economic Freedom Fund hired FreeEats.com to robocall Hoosiers with pre-recorded messages attacking Mike Sodrel’s challenger (at the time), Baron Hill in Indiana’s 9th Congressional District.

This was a violation of IC 24-5-14. Indiana’s attorney general — a Republican, incidentally — filed suit in a state court to stop the violation by various “John Does” and, eventually, FreeEats specifically. FreeEats went running to the federal courts trying to get a ruling that Indiana’s state law was preempted by federal law, was a violation of the Commerce Clause, and was a violation of the First Amendment. The state asked the District Court to abstain from exercising jurisdiction under the Younger abstention doctrine — basically a doctrine telling federal courts to abstain from reviewing matters already under way in the state courts unless justice simply can’t or won’t be done in the state courts. The District Court declined to abstain because, due to various procedural factors, the state court would not render a decision prior to the (at the time) imminent 2006 elections. After exercising jurisdiction, the District Court declined to enter a preliminary injunction, finding that FreeEats was not likely to prevail on the merits — statutory and case law both suggested that states were allowed to act on robocalls if their actions were more restrictive than federal law.

Both parties appealed – FreeEats arguing that the preliminary injunction should have been issued and Indiana arguing that the federal court should have abstained. Today, the Seventh Circuit sided with the State, reasoning that the District Court should have abstained. Essentially, the compelling circumstances cited by FreeEats for exercise of federal jurisdiction were self-inflicted. First, the state court had been procedurally delayed by actions of FreeEats itself. Second, elections are regular, the anti-robocalling legislation had been on Indiana’s books since 1988, and FreeEats had suffered adverse rulings in North Dakota under a similar law 5 months prior to initiation of its federal action in this case. (The North Dakota case had been commenced in 2004.) Because the District Court shouldn’t have exercised jurisdiction, the Seventh Circuit Court of Appeals has vacated the ruling of the District Court with respect to the preliminary injunction.

The State’s enforcement action in the state court remains pending and, according to the Seventh Circuit opinion, a hearing was to be conducted on September 7, 2007.

Rep. Orentlicher will propose tax shift

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Rep. Orentlicher will apparently introduce tax shift legislation. Specifically, his proposal will lower property taxes and raise sales and income taxes. This would be good for people who pay relatively more than others in property taxes and relatively less than others in sales and income taxes. The elderly immediately jump to mind as people with high property value to income ratios. Perhaps farmers as well. People who have kept their property purchases modest compared to their income would probably do worse under the plan.

One thing that seems to recommend itself to the tax shift is that sales and income taxes are generally seen as easier to implement because valuation is not a problem. I suppose this is the case any time you tax transactions instead of wealth itself. The parties themselves have set the value (employer/employee – seller/buyer), and the government simply needs to impose a tax rate. The devil is always in the details. I wonder if Rep. Orentlicher’s plan will add a level of complexity to prevent the tax shift from being regressive — reducing taxes on wealthy owners of high value property while increasing sales and income taxes on those with more modest means.

Wait and see, I guess. One thing that kind of worried me was the implication that he would try to get this thing passed in November without full vetting by the legislative process. Maybe I misread this paragraph:

He plans to introduce it to lawmakers in November so that the changes can be made before the 2007 tax bills are re-issued in the spring.

Bad idea. This is too big to rush through, no matter how solid the reasons or the magnitude of the temptation to DO SOMETHING now.

Homestead deduction extension

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I don’t know whether to blame the reporting or the Governor for my annoyance on this one. Mary Beth Schneider, writing for the Indy Star, has an article entitled Homeowners get tax deadline extension.

Gov. Mitch Daniels today gave an extension to homeowners who missed the June 10 deadline to obtain a homestead deduction and credit exemption on their 2008 property taxes.

Homeowners now have until Oct. 15 to seek the exemptions. The standard homestead deduction reduces the taxable value of a home, so long as it is occupied by the owner, by as much as $45,000, while the homestead credit reduces the amount of taxes owed.

The action, though, must be ratified by the legislature. Daniels said he has spoken to legislative leaders, who agree with the step. They are expected to retroactively approve the extension when they gather for what usually is a one-day organizational meeting in November.

So, Governor Daniels hasn’t given homeowners anything other than a promise to ask legislators to grant homeowners an extension. Homeowner’s do not “now have until October 15”. If the Governor’s request is granted by the legislature in November, homeowners will have had until October to seek the exemptions.

I’m probably just picking nits here, but given the Governor’s power-seeking tendencies, I’ve become sensitized to his overreaching.

State versus local control of budgets and taxes

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The Palladium-Item has an editorial entitled State should give options to local level. In it, the editors of my old home town newspaper opine:

Gov. Mitch Daniels and Republican and Democratic leaders in the Indiana Statehouse can’t agree on much, but on this much they see eye-to-eye: County governments ought to enact the property tax alternatives that legislators in the last session provided them.

. . .

An income tax option will, as state officials note, help shift a good portion of the higher costs away from property taxes to a local option income tax.

But state officials, with a shared interest in mollifying taxpayer anger, ought to express that interest by giving local officials incentives to choose an alternative to the property tax.

With all due respect: no. If state lawmakers wanted counties to shift from the property tax to an income tax or other sort of tax, they had the power to do it; and, if that’s what they had in mind, they should have gone ahead and enacted the tax change when they decided to balance the state budget on the backs of local government.

Instead, what they did was balance the state budget by capping the property tax relief credit – Hooray! Balanced State Budget!

Then, state legislators provided options allowing counties to shift from property taxes to county income taxes – Hooray! Home Rule! Local Control!

But then they left it up to county officials to pull the trigger on the new taxes – Boo! Tax-raisin’, money spendin’ local officials. Hiss!

See how that works? You impose spending obligations on local communities — juvenile detention fees; child services, for example. You even fund those obligations for awhile. But, when times get tough for the State, you go ahead and balance the state budget and give a bit of the “screw you” to the locals. Then, to make up the gap, you force the local officials to do the tax raising.

It’s not that local officials are poor fragile things that can’t take a little heat when they make tough decisions. The problem is that the State has taken a great deal of control out of the hands of county officials with respect to spending and taxing. Their options are limited when they want to cut spending; and their options are limited when they want to raise taxes.

Want an example? On August 24, the Department of Local Government Finance just issued a letter to every county demanding that data sets from 2002 through 2008 be submitted to the DLGF by October 15, 2007. Governor Daniels’ prior appointee as Commissioner of the Dept. of Local Gov’t Finance was more lenient in terms of deadlines for submitting these sets of data to the State. Once the property tax shit hit the fan, Gov. Daniels appointed a new Commissioner, Cheryl Musgrave, who has been taking a much harder line. According to the letters, the DLGF will not approve any local unit of government’s 2008 budget or debt issues until all of the data is provided. Further, the DLGF will hold a unit’s property tax replacement credit hostage pending delivery of this data. I believe this abrupt change from the DLGF will force many counties to scramble even more than they have been from the already chaotic property tax situation. Assessors’ and Auditors’ offices around the State, already stretched thin by the demands placed on them will have to devote scarce resources to complying with the State’s data requests. In some respects, this may be adding insult to injury. Becky Williams, president of the Indiana Assessor’s Association says that the DLGF is directly responsible for counties being behind on some of the deadlines. She says, the agency hampered assessors by failing to provide new trending rules until last summer, setting assessors behind in their work and making it nearly impossible to do their job correctly and still meet deadlines.

To be sure, some counties are worse off than others. For example, the letter to Marion County indicates that Marion County has failed to provide Auditor data from Pay 2004 – Pay 2006; sales disclosure data from 2004-2005; real property data from 2004; and personal property data from 2004 – 2006. The letter to Warren County indicates that it still owes the State data from 2006 sales disclosures and real property as well as 2004 – 2005 personal property. It looks like all of the counties got demands of one sort or another.

If the State is determined to micromanage county finances, holding budgets and property tax relief credits hostage to the State’s demands, state lawmakers should at least be gracious enough to raise taxes themselves when it’s necessary.

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Since I’m on the topic of property taxes, I’ll mention this excellent article by Niki Kelly in the Fort Wayne Journal Gazette entitled “Panel floats ideas for taming property tax.” Senator Kenley’s interim study committee, the Commission on State Tax and Financing Policy, is studying the issue. Apparently it would take a 9% income tax or 13.2% sales tax to cover the property tax gap.

Apparently conservative demagogue, Eric Miller, got a cool reception from the panel when he proposed “passing a constitutional amendment eliminating property taxes in 2008 and 2009 with a public vote on the issue in 2010. Then in 2011, he said, legislators could come up with a mechanism to replace the billions of dollars that would disappear in 2012.”

Sen. Kenley astutely questioned the propriety of passing a Constitutional Amendment first and finding a funding mechanism second.

“Let me get this straight. We don’t know what the plan is until after the constitutional amendment is passed? Wouldn’t we want to pass that upfront so people would know where they are going?”

Rep. Espich pointed out that Miller’s suggestion to increase sales taxes to 8% and increase income taxes to 4.4% would generate only $4.4 billion of the $6.1 billion dollar funding gap that would be created if property taxes were eliminated.

Glenn Murphy

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Glenn Murphy Jr. was the Clark County Indiana Republican chairman as well as the head of the national Young Republicans. He stepped down, according to him because of a business opportunity, but more likely because he is accused of having molested another man while he slept. I haven’t commented on this story, not because I’m above it somehow — seems like when a guy who advocates family values and hewing to straight and narrow sexual mores as a political stance is (credibly if not conclusively) accused of committing sex acts on sleeping men on two different occasions (pdf – somewhat graphic), it’s news. My lack of commentary has more to do with the fact that other local blogs have it well in hand — most notably Taking Down Words which broke the story. ABC7Chicago.com: Clark County GOP chairman quits amid investigation. Advance Indiana has also been doing a good job on this story.

What prompted me to write anything about it was to grouse about the AP story on the subject that mentions reporting of The Evening News of Jeffersonville and The Courier-Journal of Louisville, Kentucky but, when it’s time to credit Taking Down Words, can only bring itself to mention that the police report related to the investigation was “also posted on a political Internet blog.”

No respect.

Update Murphy plead guilty in June 2008; served time in the DOC and was released in October 2008; and was registered as a sex offender as of March 2010.

State leaders urge local government to raise taxes

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State leaders united to urge local communities to raise taxes. They didn’t use those words, of course.

Referring to three local income taxes authorized by the General Assembly, two of which limit or reduce property taxes, Gov. Daniels, Senator Long, and Rep. Bauer said:

Local government has been given an unprecedented opportunity to cut property taxes in record amounts, and it must act today. We are encouraging all Hoosier citizens to contact their city and county councils and urge them to begin the process to cut their property taxes now.

Neat idea – let’s have local government officials take the heat for raising taxes. We won’t mention that part of it. We’ll just talk about “property tax cuts.” This dovetails nicely with Gov. Daniels’ habit of blaming the property tax increase on local government run amok, nevermind that this is not actually the case.

I’m not totally opposed to the idea of replacing some property taxes with income taxes — so long as the swap isn’t structured so lower income people end up footing more of the bill. But, I’m a little irritated at how shabbily local government is treated by the State. I know crap flows downhill and all, but there ought to be limits.