Monday, February 9, 2009


BY MIKE DELPHIndiana State Senator, District 29

Imagine you were in abject poverty in Central America or India or China and had an opportunity to flee for American opportunity. You take the law into your own hands and pay a smuggler. He agrees to ensure your passage to a safe house in the States.

A family from China did this a few years ago, but never made it to the States because they all suffocated in the shipping container in which they were sealed, but the smuggler made his money. In the case of our southern border, where 80 percent of all crossings are illegal, law enforcement will share stories of smuggler fees as high as $10,000 per person. What's worse, once the smugglers lead their "cargo" across the desert and arrive at the safe house, they coerce concerned loved ones at home into paying even more, threatening to expose the new arrivals, which would result in immediate deportation.

After the final extortion racket, these people, many of whom don't speak a lick of English, are farmed out to various communities throughout the country. They know few people and naturally gravitate to folks who look and sound like they do. Not having a specific job guarantee, they take what they can and enter into modern day American slavery. Some businesses justify this on the grounds that they are providing a better opportunity than could be found at home.

In 1986, President Ronald Reagan signed into law the Immigration Reform and Control Act, stating that illegal immigration was a "challenge to our national sovereignty." This was to be the final reform measure needed to once and for all solve our illegal immigration problem. Illegal immigrants in the United States for longer than four and half years were given amnesty. In exchange, businesses were to be held accountable from this point on for knowingly and willingly hiring illegal immigrants.

Unfortunately, this law never truly lived beyond its most generous proposal of the blanket amnesty. But the intention was clear: No more amnesty. The American people had had enough.

This past December, the feds arrested 15 illegal contract workers at the BP Refinery in Whiting. Gary Hartwig, special agent-in-charge of the Immigration and Customs Enforcement Office of Investigations in Chicago, stated in a news release, "There is a serious public safety concern when illegal aliens ... are working in secure areas of one of our nation's largest oil refineries ... (it) represents a significant vulnerability in our national security."

Costs resulting from illegal immigration are equally staggering. Four surveyed hospitals estimated total unreimbursed health care costs to be $2.7 million per year. Multiply that across the state. Education cost has been estimated to be in excess of $200 million annually. This doesn't include the cost of displaced Hoosier workers who unfairly compete for jobs with noncitizens. With unemployment at 8.2 percent and an estimated 266,469 citizens out of work, Hoosier tolerance for this type of discrimination is low.

The highest judicial ruling on the subject, decided by the 9th Circuit Court of Appeals, gives us the most up to date legal opinion on the approach of SB 580. It's constitutional. Business leaders are starting to speak out on the effectiveness of E-VERIFY, an identification verification tool for ensuring a stable and lawful work force. The president of Indiana Packers in Delphi, Ind., testifies that the tool has been used successfully by them since 1997.

But for me, this issue is about more than national sovereignty, human rights, jobs, public safety and security. It's about one of our basic pillars of democracy, the respect for the rule of law. As long as America remains the shining light of hope to the world, that principle is worth fighting for.

Let's put principle ahead of profit.

State Sen. Mike Delph represents Senate District 29, which encompasses Carmel and Indianapolis. The opinion expressed in this column is the writer's and not necessarily that of The Times.

Guest Commentary from The Times
Monday, February 9, 2009

Blunt Proof of the Feasibility to Permanently Abolish Property Tax

Media Contacts:
Melyssa Donaghy 317-938-8913
Max Katz 765-409-6669

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.

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.