A Citizen's Guide to Indiana

Masson's Blog

Search Results for: everybody's favorite economist

Property tax relief

by 3 Comments

Curt Slyder, writing for the Lafayette Journal & Courier, has an article on property tax relief. At the moment, property tax relief proposals are mostly dead, but such things can generally be resurrected with enough legislative effort.

Everybody’s favorite economist, Larry DeBoer (follow “Capital Comments” link), explains why this is a big issue:

The reasons why property tax reform is on people’s minds go back a few years, said Larry DeBoer, a Purdue University professor of agricultural economics.

The Indiana Supreme Court decided in 1999 that the state’s property tax assessment methods were in need of reform.

“Since then, there have been many changes,” he said.

A reassessment in 2002 shifted property assessment to a market-value basis. In 2006, properties were assessed again to show market value changes since the initial Supreme Court decision.

This year, counties will complete elimination of the business inventory tax, which will shift taxes to homeowners. At a recent meeting of county treasurers, DeBoer predicted residential taxes will go up 15 percent on average this year compared to last.

Those tax bills are due out in the next few weeks and could increase pressure on legislators before the session ends April 29.

Senator Kenley has a plan that consists of three components:

The state would pick up local governments’ share of funding for juvenile incarceration, 100 percent of the child welfare expenses and 100 percent of general fund expenses for public schools.

The State would use money from the property tax replacement fund to pay for the state’s new obligations. So, on the one hand, counties would lose a significant amount of income, but on the other hand, they would lose a significant amount of liability. The state doesn’t necessarily need to rely on property taxes to meet its obligations. Counties are limited by the General Assembly as to their taxing authority and, therefore, they have less flexibility in how they can pay for their obligations.

Reliance on property taxes is problematic. The property has value, but it doesn’t necessarily generate the wealth needed to pay a tax. On the other hand, the taxes are going to come from somewhere. If we shift it to an income tax, are we unfairly adding to the burden of wage earners who own no property while unfairly benefiting owners of large amounts of property? I guess that’s for our elected representatives to decide.

Budget Analysis by Larry Deboer

by 1 Comment

Everybody’s favorite economist, Larry DeBoer, in his news column Capital Comments, provides a nice overview of the state budget and how the projected revenue increase, $1.6 billion, might be used.

He lists the Big Four items that constitute about 80% of the budget: 1) K-12 education; 2) Higher education; 3) Medicaid; and 4) Property tax relief. K-12 wants a 4% increase, higher ed wants about a 3% increase, Medicaid is expected to rise at about 8% but the Governor thinks he can make due with 5%, and property tax relief is a work in progress but Prof. DeBoer is thinking probably $450 million. So, with the Big Four accounted for, we’re already at about $1.375 billion. If the other 20% of the budget just keeps up with inflation – about 3%, we get savings at about 10% (up from the current 9%) of the budget for the next recession, and throw in full day kindergarten, we’re looking at a need of about $2.4 billion in new money. So, from that standpoint, we’re about $800 million off.

It’s Costly to be Small

by 4 Comments

An installment of Capital Comments written by everybody’s favorite economist, Larry DeBoer, ran in the July 26, Carroll County Comet. Professor DeBoer’s commentary concerns a report (PDF) by the Department of Local Government Finance on 2005 expenditures per capita by local governments. (Senator Kenley had a column in the Indy Star on the report, and I had a blog post.)

Professor DeBoer suggests that the legislature thought it would be a good idea to make comparisons of expenditures per capita by local jurisdiction available so that citizens might be able to ask questions about why some are spending more and others are spending less. However, he says, it’s difficult to know what to make of the reported numbers. First, DLGF says that there are inconsistencies in how jurisdictions report their numbers. Second, operating costs and infrastructure costs are combined. Third, the numbers reported by DLGF don’t seem to reflect patterns seen in previous research such as wealthy jurisdictions spending more per person and jurisdictions with more homeowner property spending less.

Prof. DeBoer notes that at least one pattern that shows up, however. Small jurisdictions spend more per person. Of the 11 counties in the state with fewer than 15,000 people, 9 of them spend more per person than the typical county. The smallest counties averaged $1,570 per person compared to a $1,090 average for all counties. He suggests that this might be a symptom of “economies of size” which I take to mean that there are certain fixed costs for a county which have to be incurred regardless of how many citizens the county has. The bigger counties get to spread these costs over more people.

Last year the General Assembly passed HEA 1362 which might provide some assistance for the smaller counties. It provides a mechanism by which political subdivisions, including the small counties with high overhead, can use cooperative agreements with cities, towns, other counties, or other jurisdictions to deliver services, share equipment and employees, or buy services from one another. Through such cooperative agreements, the small counties might generate the sorts of economies of size currently enjoyed by the larger counties.

Pi Day

by 1 Comment

Today, 3-14, is Pi Day. I have missed the preferred time of celebration of the “mathematical mystery” – 1:59.

For Hoosiers, there is no better way to celebrate pi than to consider what might have been. In 1897, the House passed HB 246-1897:

A Bill for an act introducing a new mathematical truth and offered as a contribution to education to be used only by the State of Indiana free of cost by paying any royalties whatever on the same, provided it is accepted and adopted by the official action of the Legislature of 1897.

Basically, the House of Representatives was seeking to legislate the value of pi. Among other things, the bill specified that “the ratio of the diameter and circumference is as five-fourths to four” which is to say “5/4 divided by 4”, which is to say “3.2.” After the House passed the bill 67 to 0, it was referred to the Senate Committee on Temperance which reported it favorably to the full Senate. Fortunately, Purdue mathematics professor Clarence Abiathar Waldo was in town lobbying the the legislature and was able to explain the bill to members of the Senate and that it was incorrect. Like all truly fun bills, this one died in the Senate when Senator Hubbell moved to postpone consideration of the bill indefinitely. Senator Hubbell was quoted as saying, “the Senate might as well try to legislate water to run up hill as to establish mathematical truth by law.”

Of course, we should not laugh too much at the benighted souls of the 19th century. We have our own band of unreflective legislators and constituents who would seek to legislate medical truths (also see here) by law.

But I digress. For more information on Indiana’s Pi legislation, check out this page, from everybody’s favorite economist, Larry DeBoer.

J&C on LSA’s Property Tax Report

by Leave a Comment

The Lafayette Journal & Courier has an editorial referencing a property tax study done by the Legislative Services Agency and everybody’s favorite economist, Larry DeBoer. (Discussed here. Their take: so what. Taxes are going to have to go up this year because of the General Assembly’s budget. And, because the General Assembly passed the buck, the tax raises are going to have to be done at the local level.

That makes me think, if state and federal taxes had gone down some, I wouldn’t mind the county taxes going up. The more local the tax, the less I resent it. But, of course the federal income tax is still a huge part of our collective tax burden and the benefits we receive from it are usually the most indirect (or almost non-existent: see Iraq.)

LSA Report on Property Taxes

by Leave a Comment

There is an article by Niki Kelly in the Fort Wayne Journal Gazette entitled Tax credits eased pain of change and a similar article by Michele McNeil in the Indianapolis Star entitled, Surprise! Property Taxes Fell for Most. The stories are based on a report by the Legislative Services Agency and everybody’s favorite economist, Larry DeBoer.

The report – given by the Legislative Services Agency and Purdue University Professor Larry DeBoer – examined how tax bills shifted between classes of property as well as what the shift would have looked like if lawmakers had not added $800 million in property tax relief.

“People who see tax decreases don’t say much while people who see tax increases do,” said DeBoer, referring to angry citizens who decried the reassessment. “The reality is a majority of homeowners in Indiana got tax cuts after reassessment and restructuring.”

The 2002 reassessment saw the state move to a more market-based tax value system, as opposed to the former system that depreciated older homes while assessing business property much closer to the market value than residential.

That is why businesses saw little or no increase under the new system and residential homes felt the brunt of the shift.

Tax bills for agricultural land and rental properties went up pretty significantly, 5.7% and 11% respectively.

When studying comparable homesteads – or properties that did not change due to additions or major renovations – almost 58 percent of Indiana homeowners saw a decrease in their tax bill while 42.5 percent saw increases.

Overall, just 5.3 percent saw increases of 100 percent or more and the average change was a $4 savings statewide.

The news would have been far worse if legislators hadn’t passed a restructuring package in a 2002 special session that largely targeted residential homesteads.

According to DeBoer, if the General Assembly had done nothing, homeowners’ bills would have gone up an estimated 51.2 percent and agricultural bills would have jumped more than 20 percent.

“In case there are any homeowners who think tax restructuring didn’t matter, I think we can disabuse them of this notion,” DeBoer said.

Early predictions that average residential tax bills would go up 33 percent were fairly accurate when discounting an unusual 10.6 percent growth in tax levies that year.

Without that – and without restructuring – tax bills would have gone up 35.4 percent.