Looks like Tracy Warner, of the Fort Wayne Journal Gazette, couldn’t stay away from blogging entirely. He is authoring a blog called Indiana Tax Facts. (h/t Indiana Law Blog). One entry he has up is called Replacing property taxes.

There has been a lot of talk about taking away the property tax and replacing it with something else. That sounds like a pretty good idea, but becomes less so when you start doing the math. Apparently Sen. Ford has developed a program to do just that in order to analyze what would be necessary to replace the $5.65 billion in property taxes produced in 2006.

Using Ford’s calculator, Indiana would have to raise its sales tax to a nation-leading 8 percent plus dearly double income taxes from the current 3.4 percent to 6.4 percent – an increase of 88 percent – plus, for good measure, raise the corporate adjusted gross tax from the current 8.5 percent to 9.5 percent.

And those increases don’t replace local income taxes, which stand at 1 percent tax in Allen and some other counties.

For someone making $50,000 a year, the increase in the income tax alone would be $1,500. For someone making $75,000 a year, the increase would be $2,250. How many people with similar incomes would end up paying less than they do in property taxes?

The money is coming from somewhere. Folks ought to figure out whether they’ll do worse or better under a new system. If they’ll be doing worse, they’ll want to figure out whether their generosity is warranted.

[tags]Indiana property taxes[/tags]

Why are property taxes going up? Once again, Larry DeBoer, everybody’s favorite economist, has the answers.

Step One: For decades prior to 1998, Indiana had given homeowners a tax break by under-assessing houses relative to business property. The Town of St. John challenged this practice, and the Supreme Court required assessments based on market value.

Step Two: In 2002-03, reassessment was based on market value and tax bills on older homes jumped. The General Assembly provided about a billion dollars in property tax relief to ease the pain.

Step Three: The General Assembly found this level of property tax subsidy unsustainable for the State budget and decided to cap it. According to Prof. DeBoer, the cap accounts for about 4% of the recent 24% increase.

Step Four: Part of the 2002 tax reform with the huge property tax subsidy was elimination of the inventory tax. The last 51 counties eliminated their inventory taxes this year. (Other counties had done so in prior years.) The inventory tax shifted to other taxpayers and hit particularly hard in places, such as Indianapolis, with a lot of inventories. On average, the inventory tax reduction accounts for another 4%.

Step Five: Trending. Trending requires assessors to keep up with assessed value. In the past few years, assessed values were to be based on what a property was worth in 1999. This year, residential property values were to play catch up by going from 1999 levels to 2005 levels. Business property values were already subject to trending and, therefore, the changes in assessed value for business property values were not as dramatic. In Marion County and some others, however, business assessments were not trended. According to Prof. DeBoer, trending accounted for about 10% of the 24% statewide increase.

Step Six: Rising local tax collections account for about 6% statewide. Places with big government construction projects have higher increases and those without tend to have lower increases.

Homeowner tax bills are increasing mostly because of tax shifts, from businesses to homeowners, and from the state budget to local taxpayers. In most places, big homeowner tax hikes are not the result of large increases in tax collections. Big increases in government spending are not the main problem.
. . .
Property assessment is the way we divide up the cost of local government among taxpayers. Market-value assessment says that homeowners should pay more than they did under our old system. Homeowners don’t think that’s fair.

Perhaps it’s time to step back from the year-to-year tax crises and ask ourselves, “What is a fair way to divide up tax payments?” Perhaps that’s one topic the governor’s new commission will take up. If so, the question will be, “Can we agree on what’s fair?”

(Emphasis added).

[tags]property taxes[/tags]

The legislative study committee reviewing the property tax situation received some advice from Gov. Daniels yesterday. Ryan Kitchell, director of the governor’s Office of Management and Budget pushed the Governor’s plan to target rebates at those whose property taxes exceed 1.1% of their property’s assessed value.

As a policy matter, that makes as much sense as anything else, I guess. But, something is really wrong when we’re still debating this in between sessions. The legislature is responsible for making tax policy. If they gave the Governor the discretion to dole out the rebate checks willy-nilly, that was irresponsible. If they didn’t give him the authority, then why even have this discussion? The legislature chose its tax policy earlier this year. Stick with it until the next session and revise it then, if necessary. I don’t see any unforeseen emergency here. What I see is certain lawmakers getting nervous as the chickens come home to roost on policies they chose.

In my mind, special sessions are appropriate for resolving unfinished business (say, passing a budget when no agreement was reached during regular sessions) or for addressing situations that could not be foreseen during the regular session. They are not appropriate just so lawmakers can have a chance to change their minds. “No take backs” as we used to say when I was a kid. Making laws fluid – changeable at any time creates uncertainty. I don’t think lawmakers want to set a precedent to the effect that laws can be revisited at any time of the year. I think the short term property tax pain is preferable to the long term uncertainty of an ever-changing law book.

The Indianapolis Star had a column on July 25 entitled Don’t blame businesses; they pay their share. The column was written by Kevin Brinegar and Patrick Kiely and it basically asks that the blame not be placed on businesses because, after all, they pay their fair share. Now, in this context, would it have killed the Star to add a little more context like, say, I don’t know, that these guys are lobbyists for the Indiana Chamber of Commerce and the Indiana Manufacturers Association? Because, at least on the version I’m getting online, that information is nowhere to be found.

This part was a little amusing:

The elimination of the state’s tax on inventory has also been a focal point of “what went wrong.”
When the inventory tax repeal passed the 2002 General Assembly, measures were provided to protect homeowners, but it was up to each county to act. Counties were encouraged to eliminate the inventory tax early — before 2007 — and to implement a homestead credit in order to negate any shift in taxes to homeowners from an inventory tax elimination that has helped secure thousands of new jobs throughout the state.

“Implementing a homestead credit” is so much nicer than saying, enacting a local income tax to offset the lost inventory tax revenue. But they’re right. Counties were given the option to impose a local income tax to offset the inventory tax losses. That Marion County did not was poor planning. Once the decision was made by the General Assembly to shift the tax burden from businesses paying inventory taxes to property tax payers or, at a county’s option, income tax payers; it was foolish for Marion County to fail to act.

Their argument is that businesses were over taxed before. By extension this means either that government was spending too much or other tax payers were paying too little. Regardless, the fact of the matter is that residential property tax payers are paying more because business interests are paying less. We can certainly have a policy debate about whether this is a good thing or a bad thing.

I don’t fault them for making their pitch, but the Star really ought to be a little more forthcoming about the background and interests of their columnists in a situation like this. I guess “Business Lobbyists say Businesses Not to Blame” wasn’t a catchy enough headline.

Representative Dave Crooks is going to have a radio show starting September 1, airing from 9 to 10 a.m. (CDT) on WAMW-AM (1580) and WAMW-FM (107.9). Internet users will be able to listen to the show through either www.wamwamfm.com or www.davecrooks.com.

“We want this show to become the place that people can visit to speak their minds about the issues that concern them,” Crooks said. “We aren’t here to talk about Lindsay Lohan or Paris Hilton, but we are going to talk about property taxes and creating jobs and helping our schools and getting more people involved in the political process. I’m hoping the show will help citizens better understand how their government operates.”

Good for Rep. Crooks. He was always very kind to me when I was a rookie Legislative Services attorney. Then again, I think he was a rookie Representative at the time and probably didn’t know any better. Now, 10 years later, he’s getting to be something of an old warhorse and I’ve some how become a crotchety old man of the blogosphere, so I guess times change.

Hopefully, his radio show can make enough money to justify its time slot. The glory of the blogosphere is that it costs next to nothing. Educating interested citizens about how government works seems invaluable to me. There is plenty I don’t know about the workings of government, but hopefully I’ve been able to shine a bit of light onto the things I do know for people who are curious about such things. And, hopefully, Rep. Crooks radio show will do the same.

Growing up in Richmond, I am not naturally inclined to be sympathetic to Delaware County, home of the Muncie Central Bearcats who beat my Red Devils on more than one occasion. But, even they deserve better treatment than they’re getting from Indianapolis.

Check out this set of mixed messages as reported by Seth Slabaugh for the Muncie Star Press:

On Wednesday, Gov. Mitch Daniels directed DLGF to initiate a reassessment of property in Delaware County based on evidence that errors were made in the assessment of numerous commercial and industrial parcels.

“At this time, businesses and homeowners should pay the same amount they did in 2006 as directed by the county treasurer,” DLGF reported Wednesday in a news release. “Adjusted property tax bills will be issued once the reassessments are complete.”

But in an interview Wednesday, DLGF spokeswoman Michele Brackemyre said she was not 100 percent certain that taxpayers should pay the same amount they did in 2006. “I don’t think that decision has been made,” she said, adding that the final decision would come after DLGF Commissioner Cheryl Musgrave met with Delaware County officials.

On Thursday, Musgrave said, “Based on the governor’s announcement yesterday, taxpayers are to pay what they did in 2006.”

But that’s not what Gary Abell, a spokesman for the governor, is saying.

Musgrave is going to set up a meeting with Delaware County officials “to work through and answer questions on these things,” Abell said. “Ultimately, it will end up being the decision or determination of the county treasurer as to whether they should pay 2006 or 2007. It’s ultimately a local call.”

Seems like a natural result of shooting first, asking questions later.

In his accustomed style of shooting first, asking questions later, Governor Daniels has decided to order reassessments in Gibson, Posey, and Delaware Counties, the hearings that are required to precede such an order will take place later. As I mentioned earlier, the Governor does not have the authority to order a reassessment. That power resides with the Department of Local Government Finance (DLGF), but as the head of the DLGF, Cheryl Musgrave, has been there for less than a month, it’s reasonable to conclude she is essentially a rubber stamp for the Governor at this point. However, where the DLGF suspects reassessment is necessary, they are supposed to hold hearings before making a determination. These hearings would seem particularly necessary since the DLGF seems not to have indicated prior disapproval of these counties’ assessments — a hearing should focus on what changed to suddenly make these assessments unacceptable. From the news stories, it seems Gov. Bonaparte is declaring reassessment by fiat. He’s never been real interested in the pesky bureaucratic details of democracy. I have not seen a determination on whose taxes are going to pay for these reassessments.

Also, and this could have everything to do with my ignorance as opposed to evidence of further disregard for the details of the law, the Governor is ordering that the property taxes for these counties be frozen at 2006 levels for the time being. I’d be interested to know where the Governor gets the authority to do this.

God bless our fellow citizens in Morgan County. According to an article in the Indianapolis Star, they went ahead and adopted the local option income taxes authorized by the General Assembly as tools to offset reliance on property tax. The income tax imposed as a result of these increases will be 1.45%. They chose all three options offered by the General Assembly. According to the article:

Option #1 is a 0.2% income tax and it will pay for the increased cost of government in 2007/2008 from the previous year.

Option #2 is a 1% income tax and it will be used to offset current reliance on property taxes – in other words, it ought to reduce property taxes.

Option #3 (available to local governments only if options #1 and #2 are adopted) is a 0.25% income tax which will be used to fund local public safety expenses.

The article does not say, but I believe Option #2 also required a decision by the county as to whether the property tax relief would be directed to all property owners; homeowners only; or homeowners and rental-housing owners.

In Lafayette, a John Doe is seeking relief from sex offender residency restrictions imposed by the General Assembly. The restrictions prohibit certain registered sex offenders from living within 1,000 feet of school property, public parks, or youth centers. I can’t talk too much about the issue, but from this Journal and Courier article, I’ll just say that Sheriff Brown’s attorney makes a heck of an argument.