Wednesday, September 12, 2007

City Council Should Not Enact Property Tax Reform

I spoke at last night's city council meeting about why enacting any of the property tax reform options before the council would be a bad idea because I was worried that this topic was beginning to fall off the radar. However, today's JG covered the meeting between county and city officials where they discussed the various options available to them to shift some of the property tax burden onto income taxes. While some readers may think this sounds like a good idea let me remind you that you should be careful what you wish for. Nearly all working homeowners would pay an increase in overall taxes under these plans. Thankfully Commissioner Nelson Peters and deputy auditor Tera Klutz seem to understand this:
County officials do not want to increase the local income tax this year because that would negatively affect the majority of Allen County residents who are working homeowners, Commissioner Nelson Peters said.

Even a small increase in the income tax would mean workers would pay more taxes overall, despite a lower property tax bill, Deputy Auditor Tera Klutz said.

In a related editorial in today's JG, it sounds like Commissioner Bill Brown favors the option that would provide "relief" to all property owners:
Q. County Commissioner Bill Brown suggested any tax break should go to all property owners, including businesses. Is that a good idea?

A. Only if City Council members consciously decide to move some of the tax burden now paid by businesses to wage earners. And that move will offer the least relief for property owners, many of whom will face higher overall taxes.

This issue illustrates a fact Hoosiers must keep in mind. Overall, each county would raise the same amount of money from workers and property owners; changes would shift who pays what. Workers who don’t own property would likely pay more.

The JG needs to make a more forceful statement here. Not only is it a certainty that workers who don't own property will pay more, but it's also true that any family or individual making over $24,000/yr will pay more. Does anyone think it's a good idea to decrease the take home pay and increase the overall tax burden for workers that are already significantly below the national median wage? Obviously Bill Brown does. Also, the JG should stop referring to a flat income tax as "progressive" - it is not.

The bad news is taxes are what they are - they will not be going down no matter what the city council decides. It's a zero sum game - for everyone that experiences tax "relief" somebody will see a tax increase. The problem is that under the options being considered by the city council working class people will be the ones to shoulder more of the burden.

If city and county officials want to do something then they should look at ways other states have restricted future property tax increases - namely they should look at levy caps that tie government spending increases to inflation and economic growth. Alas, that is another post for another day...


John B. Kalb said...

Jeff - One problem with the "Caps" you are suggesting, is that our state legislators will just find a way to get around the law - witness the great way that the "Lease/Bond law" legally allows our redevelopment commission to by-pass the indebtedness of a political entity which is prohibited by our stae constitution! John B. Kalb

Jeff Pruitt said...

Perhaps but levy caps will be pretty hard to get around because it's a cap on government expenditures. Note this is much different than a property tax cap or ceiling like we have now. Also, they have been successfully implemented in other states...

J Q Taxpayer said...

Caps have never stopped any of them. Unleasing the income tax is little more then them getting a bigger hand into your pockets.

As long as you have a buck the tax guys have a buck.