"IT IS THE DUTY OF THE PATRIOT TO PROTECT HIS COUNTRY FROM THE GOVERNMENT." - THOMAS PAINE (1737-1809)


Wednesday, December 31, 2008

SENATOR DELPH GETS IT

Matt Tully's column in the Indy Star discussing lobbyist reform legislation Sen. Mike Delph is introducing in this legislative session is a refreshing change. Here's a look at Delph's proposals, which he shared with Tully recently over coffee:

  • He showed me a bill (Senate Bill 17) to require the reporting of every gift of $25 or more, including meals, that a lobbyist gives to a lawmaker. The current limit is $100; a reduction in that amount would make it harder for lawmakers to keep quiet about which interest groups are funding their dinners.

  • Then he showed me a bill (Senate Bill 73) to require state university lobbyists, including presidents and trustees, to actually register as lobbyists. While it is crucial that we support and fund Indiana's universities, those institutions should have to abide by the same rules as other lobbying groups. Few groups work harder than universities to tap into the state budget. Is it too much to ask that those efforts be disclosed?

  • Two other bills that have not yet been filed would ban lawmakers from accepting gifts from lobbyists on out-of-state junkets and force the legislature to create a commission to fairly draw legislative districts.

All of Delph's ideas are worthy of becoming law. The lowering of the reporting limit for gifts is important. There are some legislators who are dined daily by some of the state's most powerful lobbyists at the city's most expensive restaurants while the legislature is in session. All of those expensive meals never seem to trigger the $100 reporting requirement and so a legislator's constituents have no idea just how much he or she is taking in freebies from lobbyists. Delph's targeting of state university lobbyists is also a good idea. All of those free tickets to IU and Purdue sporting events really soften up legislators. Similarly, banning out-of-state junkets paid by lobbyists is a great idea.
I recall hearing a story about a freshly-appointed lawmaker a few years ago who took the place of a legislator forced out of office under an ethics cloud. The freshman legislator took a free fishing trip to Florida with a group of lobbyists (unreported, of course). Not surprisingly, that legislator resigned a few years later from the legislature to become a lobbyist, just like the ethically-challenged legislator who preceded him in office. And that brings up Sen. Pat Miller's legislation. Yes, we need a law barring state lawmakers from resigning their legislative seats to become lobbyists. She proposes a one-year cooling off period. A two-year period would be preferable but anything is better than what we have.
I particularly like Delph's idea to create a bipartisan commission to fairly draw legislative boundaries. So many bad lawmakers remain in office for decades because the legislative boundaries are drawn to favor incumbent members of the party drawing the boundaries. Districts should be drawn compactly and without regard to their political make-up. States like Iowa which have adopted this approach have seen far more competitive races for the state legislature and Congress.
Chances are that neither Delph's or Miller's legislation will go anywhere if the past is prologue. Indiana lawmakers like their all-too cozy relationship with lobbyists too much to give up the perks that come along with those relationships. It is nice to see that some lawmakers understand the problem, even after participating in the process for many years. Mayor Greg Ballard could take some cues from Delph. Less than a year into office and he already seems to have an almost depraved indifference to the ethical clouds which have enveloped his entire administration. And this after he ran a campaign promising the exact opposite.

From Advance Indiana

Posted by Team Hammond at Wednesday, December 31, 2008

Blunt Proof of the Feasibility to Permanently Abolish Property Tax

IMMEDIATE RELEASE
Media Contacts:
Melyssa Donaghy 317-938-8913
Max Katz 765-409-6669
www.HoosiersForFairTaxation.com

BLUNT PROOF OF THE FEASIBILITY TO PERMANENTLY ABOLISH PROPERTY TAX.
Hoosiers For Fair Taxation, Senator Delph, Representative Noe, Representative Elrod and many other legislators along with Stop Indiana, attorney John Price, Eric Miller's Advance America, and the Statewide Taxpayer Alliance know that property tax abolishment, without substantial increases in sales tax and income tax, is realistic and possible. The economist Dr. Bill Styring's 2/2/2 Plan demonstrates that the state of Indiana can completely replace property tax without changing the state's current spending habits.

Dr. Styring's plan does not account for positive changes in Indiana's economy that will undoubtedly follow the elimination of property tax such as heavy real estate investment and increased consumer spending due to increased statewide disposable income. The real estate investment in Indiana alone would cause such an economic boom that it could likely end our abandoned property and foreclosure crisis. Property tax elimination would also likely cause a surge in Indiana's population as more people locate to Indiana to take advantage of real estate purchase opportunities without the burden of property tax. With the population surge would come more sales and income taxes.

The General Assembly does not have to adopt a specific plan until the year 2011. In the meantime, we recommend that the General Assembly approves the 27steps outlined in the report prepared by the Sheperd Kernan commission. While the Governor's commission cannot forecast the savings to the state once the plan is implemented, there is no doubt that the savings would be substantial--perhaps equivalent to the the entire property tax burden currently placed on Indiana's homeowners because our legislators have not had the political will to liberate Indiana's governing structure and her taxpayers from the 19th century.

Our citizen networks will work to replace all legislators who do not support property tax repeal in the November 2008 election.

The 2/2/2 Plan, to replace property taxes in Indiana based upon the latest revenue forecast (07/08 fiscal, estimate):

1) Current IN sales tax (state level rate of 6%): $5.601 billion2% increase would yield an additional $1.867 billion

2) Current corporate profits tax: ~$2 billion

2% increase would yield an additional $.286 billion ($286M)

3) A 2% statewide average of the COIT would yield $2.705 billion to cover local civil units of gov.

By adding these three together ($1.867 billion + $.286 billion + $2.705 billion), a total of $4.858 billion is realized; enough revenue to replace property taxes.

PROPERTY TAX HISTORY PREPARED BY DR. BILL STYRING
Indiana has a 70-plus year history of attempts to lower property taxes by raising other, non-property taxes. In every case these have failed miserably. The new taxes, or higher rates on old taxes, remain in place. And, in short order, property taxes rise back to their old levels, poised to roar even higher.

--1933. General Assembly imposes two new taxes: an individual gross income tax and a corporate gross income tax. The morgue of the Indianapolis Star indicates that the political leadership at the time said this was for property tax relief (1933 was the pits of the Great Depression, and people were losing their homes. Home prices declined by over 40% in the 1929-1933 period). Property tax relief was nonexistent. The state used the money to bail out the state's own finances.

--1963. General Assembly imposes a new sales tax at a rate of 2% and changes the 1933 individual gross income tax (from 1933) to an adjusted gross income tax (the one we have now) at a rate of 2%. Again, the ostensible reason was for property tax relief and again little PTR was forthcoming.

--1967. Those 1963 tax changes were raising more money than projected. The GA decides to give back 8% of sales and income tax revenue to local government for property tax relief. Local units spent the money. No PTR.

--1973. Gov. Otis Bowen launches the most determined PTR offensive yet. The sales tax goes to 4% and a new corporate supplemental net income (profits) tax is imposed. Strict property tax levy controls are imposed. It works... for a time. By 1980, property taxes adjusted for inflation are some 30% lower than in 1973. When Bowen leaves office the levy controls are relaxed. By the end of the decade, property taxes (adjusted for inflation) are back to 1973 levels. The doubling of the sales tax rate from 2% to 4% remains in place, along with the new corporate SNIT.

--2002. More fiddling with the sales tax in the hope of property tax relief. The results of this are obvious, or we wouldn't be debating the current property tax mess. All of this suggests that unless the property tax is totally ripped up by constitutional amendment, the assessment and collection mechanism dismantled, it will grow back. The PTR-inspired hikes in other taxes remain. That is our history. It is a terrible deal for taxpayers.

2. A vote in the 2008 legislative session for a constitutional amendment to repeal property taxes does not amend the constitution. It merely starts the amendment process. Amendments must be passed by two consecutively elected General Assemblies, then submitted to a referendum. Thus any amendment passed by the '08 Assembly must be passed by either the 2009 or 2010 legislatures, then submitted to the voters at the 2010 general election. The General Assembly does not need to decide on a "replacement revenue" package until the 2011 session.

3. What might such a "replacement revenue" package look like? The particular answer will come from the 2011 General Assembly and cannot be determined now (if for no other reason than forecasting state level taxes and property taxes out that far would be a most unreliable exercise. No one need be locked into any particular plan just yet. However, as an illustration that a replacement plan is feasible and less scary than many fear (we don't need to be talking about a 12% or 13% sales tax ... in fact, we should not be), consider just this one possibility.

Local sales taxes are generally very bad policy, for a whole host of reasons too numerous to mention in this short sketch. Sales and corporate taxes are best levied at the state level. It happens that roughly a 2% increase in the sales tax and a 2% increase in the corporate profits tax roughly take care of school propertytaxes. The loss of local control by the state assuming school property taxes is minimal. About the onlylocal control left is on building projects.

For local civil units, a statewide average increase in the individual adjusted gross income tax of about 2% suffices to replace local civil government property taxes, higher than 2% in some units, less than 2% in others.

Thus, a "2-2-2" plan~2% sales and 2% corporate profits at the state level for schools and a 2% average on personal income taxes for civil units—is about what would be needed. This is merely a ballpark projection to 2011.

There may be better plans, it's really a policy question for the General Assembly: do you want to make the trade of something like this in exchange for no-property-taxes-forever-on-anything? Everyone understands "zero."

4. Are there "practical problems? Of course. The two identified are how to make the civil government transition from a property tax base to an income tax base, and how to handle debt backed by property taxes. Without elaborating, the former can be handled using locator software (Map quest-type programs). The debt problem might be handled by treating the current state paid PTRC's as in lieu of property taxes (which they are) and paying PT-backed debt service from each unit's own PTRC.

Conclusion: Total elimination of the property tax via constitutional amendment is the only way to give property tax relief that will stick. The other tax action necessary to achieve this goal—in 2011-are large but not so scary as "a 13% sales tax." They are feasible. The question is for the General Assembly. Are we going to once again go down that 70-odd year path of failed PTR policies or are we going to rip the property tax up by the roots?

Posted by Hoosiers For Fair Taxation on Friday, January 4, 2008.